Like many value stocks, Omnicom is materially undervalued relative to its intrinsic value. However, it is also unique because its stable ROIC / EVA has not, historically, been reflected in its relative stock price nor its equity beta. Resolving these inconsistencies may require a material reduction in its excess cash holdings and/or additional corporate governance reform. It is not inconceivable that an activist investor will be drawn to the company, despite its status as a large cap stock.

1. LONG OPPORTUNITY: OMC (NYSE)
INTRINSIC VALUE, EXCESS CASH &
ACTIVIST INVESTORS: 50+% UPSIDE

2. Disclaimer
1
The opinions expressed in this presentation by Lateral Capital Management, Inc. (“LMCI”) are not an
investment recommendation and are not meant to be relied upon in reaching an investment
decision. LCMI and its employees, consultants and contractors are not acting in an investment, tax,
legal or any other advisory capacity.
The opinions expressed herein address a limited number of aspects regarding a potential investment
in securities of the companies mentioned and are not a substitute for a comprehensive investment
analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an
incomplete set of information, and has limitations as to its accuracy.
LCMI recommends that potential and existing investors conduct a thorough investment analysis of
their own, including a detailed review of the companies' SEC filings, and consulting a qualified
investment advisor. This material is based on information obtained from sources believed to be
reliable, but the reliability of that source information.
Any opinions or estimates constitute a best judgment as of the date of this presentation and are
subject to change without notice. LCMI explicitly disclaims any liability that may arise from the use of
this material.

3. Executive Summary
2
 Omnicom Group (“OMC”) has an impressive track record of earnings and cash flows
 Its free cash flow generation during economic recessionsis particularly impressive
 A long-term campaign of stock buy-backs has contributed to per share outperformance
 However, the OMC stock price has not outperformed the S&P500 Index and has a relatively high
equity beta
 There are several factors behind this lackluster price performance
 We consider the most likely candidates to be the excess cash holdings (which impairs economic returns)
as well as on-going corporate governance concerns
 As well as a general market misunderstanding of the business drivers and relative performance record
 Intrinsic value, trading comps and acquisition valuation all suggest the stock is 30% to 60%
undervalued
 Major Board changes are due in 2018. Before then the company could take a number of steps
to enhance OMC’s relative stock price performance
 A $2 billion stock buyback via a Dutch tender auction would signal to the market the intrinsic value of the
company
 Continued reform of corporate governance arrangements are possible, even before the 2018 retirement
of the Executive Chairman
 Failure to take these steps may draw additional attention from Activist Investors

4. Table of Contents
1. Fundamental Attributes
2. Stock Price Performance
3. Intrinsic Value
4. Contributing Factors?
5. Potential Catalysts?
6. Corporate Governance
7. Excess Cash
8. Activist Investors
9. Recap
Appendix: Valuation Assumptions

5. Section One
COMPANY FUNDAMENTALS

6. Revenues are Diversified by Industry And Geography
3
While servicing clients on six continents, OMS revenues are skewed towards the US and Europe
Figure 1 & 2
OMC Revenue by Industry OMC Revenue by Geography

7. Consistent Growth With Occasional Mild Downturn
4
Grey shaded areas represent US recessions
Figure 3
Even during the 2008/9
Financial Crisis, OMC
generated positive Funds
From Operations in excess
of $[1] billion
By investing capex pro-
cyclically and continually
buying back shares, OMC
improves its Free Cash
Flow during economic
downturns

8. Share Buy-backs and Capex Are Pro-Cyclical
5
Part of the steady improvement in OMC’s per share economics is “financial engineering” made
possible by excess cash flow generation Figure 4
OMC Shares Outstanding

9. OMC’s ROIC Has Historically Been Almost Twice its WACC
6
The consistent generation of EVA over several decades is an impressive achievement; particularly during
economic downturns Figure 5
OMC Return on Invested Capital & EVA

10. OMC’s Peers Have Far More Volatile ROIC Results
7
OMC has improved both its ROIC and its EVA since 2015
Figure 6

11. Section Two
STOCK PRICE PERFORMANCE

12. OMC Has Not Historically Outperformed the Market
8
By outperforming the SPY in bull markets, and underperforming in bear markets, OMC has tracked
the SPY for decades. It remains to be seen whether the recent outperformance continues after the
next bear market
Figure 7
OMC Relative Share Price Performance

13. Its Equity Beta Is Relatively High For Such A Stable Company
9
OMC shareholders have historically seen the worst of both worlds – a stock price that doesn’t
outperform the broader market, combined with a higher risk profile Figures 8
The relatively high equity
beta also increases OMC’s
cost of equity and overall
cost of funding

14. Section Three
INTRINSIC VALUE

15. Trades at a 20% to 45% Discount to its Large-Cap Peers
10
Figure 9
By consistently creating Economic Value Add (“EVA”) over several decades, there is a compelling
case for OMC to trade at a premium to its industry peers

16. Intrinsic Value Is 35% to 60% Above The Current Price
11
Figure 10OMC Unlevered Free Cash Flow - DCF Valuation – Base Case

17. DCF Valuation Sensitivities
12
The current OMC stock price is implicitly assuming that OMC revenues will grow at 0% per annum…
forever. Figure 11
OMC Unlevered Free Cash Flow : DCF Valuation Sensitivities : % change to current stock price

18. DCF Valuation – Monte CarloSensitivities
13
We ran 1,000 Monte Carlo simulations with random revenue growth rates for each projection year
between 2017 and 2022. A number of these simulations included negative growth rate projections Figure 12
OMC Monte Carlo Simulations: Revenue Growth Rate

19. The Average Monte Carlo Valuation Upside Was Over 40%
14
Even in the most extreme Monte Carlo revenue simulation downside scenario, there was a valuation
premium to the current OMC stock price of over 13% Figure 13
OMC Monte Carlo Simulations: Revenue Growth Rate

20. Relative Earnings Yield
15
The current earnings yield differential of 700 basis points over constant maturity ten-year Treasuries is
high by historical standards Figure 14
OMC Earnings Yield Spread Over Constant Maturity 10-Year
Treasury Yield

21. Section Four
CONTRIBUTING FACTORS

22. Contributing Factors
16
Sections 4.1 to 4.4 are possible reasons for the current OMC mispricing. Sections 4.5, and 5 to 8 are
actions that OMC or third parties could take to reduce, or eliminate, the OMC mispricing Figure 15
Section numbers in Figure
15 are references to
sections of the original
written article on the
SeekingAlpha.com
website
OMC Risk/Reward Profile

23. Being a Serial Acquirer May Be a Factor
17
Figure 16
While OMC stockholders
face the risk of imprudent
acquisitions, the size and
frequency of the OMC
acquisitions is relatively
minor.
Goodwill has even
declined in recent years.
Acquisitions have not
been financed with
excessive net stock
issuance and the company
consistently uses low risk
earn-outs as a higher
proportion of the
potential purchase price
Extensive use of earn-outs (i.e. contingent purchase price payments) reduces the execution risks
associated with OMC’s acquisition program

24. Revenues are Highly Dependent on Global Growth
18
The pro-cyclical nature of OMC’s revenues may explain part of the stock price correlations with the
SPY Figure 17
OMC Revenue Sensitivity to Global Economic Growth

25. But OMC’s EVA is Not Correlated to Global Growth
19
The spread between ROIC & WACC is not driven by global growth. The stock valuation should
reflect this ability to generate positive EVA in all market conditions Figure 18
OMC ROIC & EVA Sensitivity to GlobalEconomic Growth

26. OMC EBITDA Margin Is Counter-Cyclical
20
Revenue cyclicality does not flow through to CFFO and/or FCF because of working capital
management, counter-cyclical cost controls, pro-cyclical capex & stock buybacks Figure 19
OMC Revenues vs EBITDA Margin: 2001 to LTM

27. OMC Investors Can Outperform the SPY if Buying on a Dip
21
However, in 2002 the outperformance gains were all made within a couple of months after the
lowest stock price during the market downturn. Buying after this window of opportunity would have
resulted in almost no subsequent stock price outperformance
Figure 20
Trying to buy OMC at a
depressed price and/or
trading multiple requires
impeccable timingOMC Relative Stock Price Performance vs S&P500 Index From Low Point In Each Market Downturn

28. Section Five
POTENTIAL CATALYSTS

29. Potential Valuation Re-rating Catalysts: Road Map
22

30. Intangibles Amortization Means a Strategic Buyer Is Less Likely
23
Figure 21
OMC only has $113
million in tax loss
carryforwards (as at
December 31, 2015) so a
338(h)(10) is unlikely.
Meaning the strategic
buyer cannot take
advantage of cash tax
(IRS) deductions for the
goodwill and/or intangible
asset amortization
… and/or the large acquired goodwill impact on tangible book value will also deter some strategic
buyers

31. Leveraged Buy Out Valuation
24
Figures 22 & 23
The new owner can take
advantage of the goodwill
created from prior OMC
acquisitions of other
companies.
To realize a 20% to 25% 5-year, pre-tax IRR, a generic LBO fund could afford to pay a 30+% premium

32. LBO Acquisition Leverage
25
Figure 24
The LBO acquisition should be able to rapidly de-lever in our base case scenario from around 6 times
EBITDA in 2016 to 3 times by 2020

33. LBO Valuation Sensitivities
26
If the LBO fund assumes it can exit the investment for the same EBITDA multiple as its entry price
(~13.5x EBITDA), but targeting a more realistic 15% to 20% IRR hurdle rate, it may offer as much
as a 60% premium
Figure 25

34. A 30% Offer Premium Is Viable Under Several Scenarios
27
Figure 26

35. Key Driver For Offer Premium Is Expected Synergies
28
OMC’s opex consists maily of salary, service costs, occupancy costs and SG&A
Figure 27
OMC LBO IRR Sensitivities

36. OMC Implemented a 10% O&M Cost Cut in 2009
29
Suggesting an LBO fund should be able to easily implement our base case 5% opex reduction
Figure 28
Whether a 10% opex
reduction has a
permanent impact on
OMC’s ability to generate
future revenues and cash
flow is unclear
OMC Historical O&M

37. Section Six
CORPORATE GOVERNANCE

38. Investors Concerns Over Governance Remain Elevated
30
Despite appointing a lead independent director in 2015, 36% of OMC stockholders voted for an
independent Chairman in 2016 Figure 29

39. Section Seven
EXCESS CASH HOLDINGS

40. Section 7.1
How Much Cash?

41. Cash Balances as a % of Revenues Appear High
31
Management appears to be targeting a cash holding in the range of 10% to 20% of
annual revenues Figure 30
OMC Nominal and Relative Excess Cash Holdings

42. Cash Flow Seasonality Can be Dealt with via Credit Revolver
32
OMC currently has $3.5 billion of untapped revolving credit, in addition to its current $1.7 billion in cash
holdings. Normalized cash on hand is closer to $2.5 billion Figure 31
OMC Quarterly Cash & EquivalentsClosing Balance

43. Working Capital Has Fluctuated In A Stable Range Despite OMC Growth
33
The rating agencies will not adjust excess cash in a their liquidity projections for anticipated working
capital needs if the company can drawn on bank lines Figure 32
OMC Quarterly Change in Working Capital

44. The Trend In OMC’s Cash Balance Is More Apparent On An Annual Basis
34
Corporate growth has been reflected in nominal end-of-year cash balance growth
Figure 33
OMC End of Year Cash Holdings

45. Section 7.2
How Much Liquidity?

46. Liquidity Components – Net Working Capital
35
OMC’s liquidity needs are being funded by its creditors to the tune of between $3 billion and $4 billion
per year; this is equivalent to > 20% of OMC’s annual revenues Figure 34
OMC Net Working Capital

47. Steady FFO Generation Also Contributes to Liquidity
36
Even in 2009, FFO declined 12% but was still a net positive. Contributing an additional $[1] billion of
liquidity during the worst economic downturn in recent times (i.e. 2009) Figure 35
OMC FFO & CFFO Annual % Change

48. Section 7.3
Benefits of Distributing Excess Cash

49. Section 7.4
Rationales For Holding Excess Cash

50. Are There Valid Reasons for OMC to Hold Excess Cash?
37
Figure 36

51. Section 7.5
Projected Liquidity

52. Projected Liquidity – Base Case
38
Figure 37
Projected liquidity is shown using “normalized” cash of $2.6 billion. CP issuance is not included
OMC Quantitative Liquidity Measures

53. Working Capital Association with Revenue Increases
39
Figure 38
The credit rating agency liquidity test includes a 15% EBITDA reduction scenario. In that scenario we
flat-line changes in Net Working Capital. However, OMC has historically been able to reduce working
capital needs, even when revenues were increasing
OMC: % change FFO vs $ Change in Net Working Capital: 2002 to LTM

54. Projected Liquidity Pro Forma For a $2 Billion Cash Distribution
40
Applying the more realistic cash balance of $2.5+ billion, suggests OMC could implement a $3 billion
stockholder distribution and still meet the credit rating agency liquidity tests
OMC Liquidity Tests
Figure 39

55. Projected Liquidity Pro Forma For a $2 Billion Cash Distribution
41
Monte Carlo simulations adjust the size of the credit facility, the amount of capex spend & other liquidity
variables as per the liquidity base case. All simulations are based on initial $1.5 billion cash balance
OMC: Monte Carlo Simulations:
Revenue Growth Rate:
$1.5 billion Cash Holdings: 2017E Liquidity
Figure 40

56. Section 7.6
Pro Forma Leverage and Credit Rating Metrics

57. OMC is Conservatively Levered After a $2 bn Distribution
42
Figure 41

58. Distributive Excess Cash Leaves OMC Solidly Investment Grade
43
Figure 42
Moody’s: Quantitative Credit Rating Guidelines:Business & Consumer Service Industry

59. Section 7.7
Combined Impact of Major Market Correction &
$2 billion Cash Distribution

60. Even After a “2008” Style Price Decline, Pro Forma Leverage is Moderate
44
Figure 43

61. Downside Scenario Without Excess Cash “Buffer”
45
Excess cash distribution moves OMC to its optimal cost of capital. Even a major market downturn
does not push OMC too far beyond this optima Figure 44

62. Section 7.8
Preferred Structure of Excess Cash Distribution

63. Merits of Various Options to Distribute Excess Cash
46
Figure 45
Given the extensive use of
option-based
compensation, a stock
buyback seems the most
likely of the three
alternatives for
distributing excess cash

64. Potential Stock Price Reaction Based on Buyback Premium & Trading Multiples
47
Figure 46

65. Section Eight
ACTIVIST INVESTORS

66. Large Caps are Increasingly a Focus of Activist Investors
48
Size and relative stock price performance are no longer major deterrents to activist investors. It is
increasingly common for funds to collaborate in a “wolf pack” when targeting larger companies Figure 47
Activist Campaigns Against Mega Cap & Large Cap Companies

67. There Are Several Reasons Why Activists May Target OMC
49
Governance concerns and/or excess cash holdings are two of the most common reasons why activist
investors initiate a campaign Figure 48

68. Section Nine
RECAP

69. Recap
50
 OMC’s track record of above-market ROICs and EVAs is not reflected in its relative stock price
performance
 Historically, many OMC stockhodlers would be better off buying a market ETF rather than the
high beta OMC stock
 Which should not be the case for a company that performs as well, operationally
speaking, as OMC during economic downturns
 Several valuation methodologies point to significant stock undervaluation at current price levels
 In the upside valuation scenarios there is probably 60+% price appreciation
 We considered the influence of OMC’s excess cash holdings and consider it a material drag on
financial performance without any commensurate benefits
 A conservative $2 billion Dutch-tender stock buyback could signal to the markets the
extent of the current mispricing of OMC’s stock
 Corporate governance reform has begun at OMC, although there are a number of additional
reform measures that could attract a wider audience of institutional investors to the OMC registry
 Failure to implement a cash distribution and/or material corporate governance reforms could
draw the attention of a number of activist investors in 2017

70. Appendix
VALUATION ASSUMPTIONS

71. Operating, Valuation & Leverage Model Input Assumptions
A.1

72. www.lateralcap.com
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