By Anjuli Davies, Soyoung Kim and Leila Abboud

LONDON/NEW YORK/PARIS (Reuters) - The $35-billion merger of U.S.-based Omnicom and France's Publicis collapsed on Friday after a battle for control destroyed plans to create the world's largest advertising agency.

The deal, heralded in July as a merger of equals that would enable the two agencies to compete more effectively in the digital arena, foundered on issues ranging from its complex tax structure to the firms' divergent cultures.

The two sides were also losing major work - more than $1.5 billion in the past month alone - and did not want to let the uncertainty continue.

"I have not been able to convince John that balance is balance," Publicis Chief Executive Maurice Levy said of his Omnicom counterpart, John Wren.

"Omnicom wanted their people to fill the CEO, CFO and general counsel jobs," he told Reuters. "I thought that went too far. I was not ready to cede on this point."

For his part, Wren said the two sides had failed to find a way past the strong corporate cultures that existed in each company.

"There was no one factor," Wren, 61, told Reuters.

"There are a lot of complex issues we haven't resolved. There are strong corporate cultures in both companies that delayed us for reaching an agreement. There was no clear finish line in sight, and uncertainty is never a good thing when you are in the personal service business."

On a conference call with analysts and reporters on Friday, Wren summed up the broken deal with a nod to Twitter: "If I had to summarize in a tweet it would be, corporate culture, complexity and time. And I would still have 100 characters left."

Two people familiar with the situation said relations between the two sides began to unravel in December, with tensions simmering between Levy and Wren, and the Frenchman believing the deal was turning into a takeover rather than a merger.

One person said the men met two weeks ago to agree what to do.

The key dispute over who should be chief financial officer would have influenced whether the new company inclined towards a centralized structure to manage costs, which Publicis argues has driven its higher margins, or Omnicom's more devolved approach.

Neither company will pay a termination fee, and they will split the costs of the failed deal, such as legal fees.

With the deal off the cards, analysts predicted a period of turmoil ahead for the industry as Publicis and Omnicom seek to re-engage with clients after recent business losses.

Wren disputed that Omnicom lost clients because of the merger, saying it was "absolutely not true."

One global consultant who advises clients on media spend told Reuters that agencies within Martin Sorrell's WPP, which will keep its crown as the world's largest advertising agency, had won a lot of work of late by cutting fees.

He advised existing clients of Publicis and Omnicom to use the uncertainty to negotiate better terms. He noted that some client work coming up for review in the coming months would also pit agencies owned by the two firms against each other.

Publicis shares were down almost 1 percent, while Britain's WPP was flat. Omnicom was down 0.3 percent. Smaller French player Havas, seen as a takeover target, jumped 3.4 percent.

"We see the consequences for the agency space as negative as, shorter-term, it is likely to lead to a more competitive environment and, longer-term, it dashes the hopes that the merger would lead to an easing of pressures in staff costs and client fees," wrote Liberum analyst Ian Whittaker.

Some analysts also said further deals could crop up involving perhaps fourth-largest agency Interpublic and Japanese advertising group Dentsu.

SOAP OPERA

Sorrell told Reuters the failure of the deal had turned into a soap opera.

"You now have the charade of them trying to say we're just as well off apart as we were together, which begs the question of why spend a couple of hundred million dollars to prove that being together didn't work. It was ill thought through."

Although Levy still believes Publicis should be bigger to cope with the way technology is changing the ad business, he demurred on whether the group needed a big acquisition.

"For now, our goal is simple - to accelerate our strategic plan," he said.

On Omnicom's part, executives said the company will reinstate a share buyback program and seek to increase the dividend. They are still looking for acquisitions, executives said.

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