The combined operation will have estimated billings of £40 million and will bring PHM's Ford of Europe dealership business and Wallis Tomlinson's Subaru account under one roof.
However, Andrew Stanbridge, a director of PHM and a former Saatchi & Saatchi senior executive, who becomes the group managing director, denied the accounts were in conflict.
"Both clients have been spoken to and are content, he said. "PHM works on aftersales for Ford, Jaguar and Land Rover, while Wallis Tomlinson concentrates on new car sales for Subaru."
The marriage will give the Leamington Spa-based PHM a UK city centre presence to complement its office in Cologne, which was set up to service its Ford business.
It will also result in a combined client list, which includes Associated British Foods, Johnson & Johnson, Kraft Foods, Samsung National Express and Denby Pottery.
"For PHM the deal provides extra critical mass, an increased above-the-line presence and an extended client list, Stanbridge added. "Wallis Tomlinson gets access to the digital technology many of its clients have been looking for. We believe McCann-Erickson Central is the only Midlands agency now bigger than us."
Andrew Clift, PHM's managing director, will be the chief executive of the group. George Wallis and Geoff Tomlinson, who founded Wallis Tomlinson 12 years ago, take over as the chairman and executive creative director respectively.
The two agencies, which will come together as Palmer Hargreaves Wallis Tomlinson, will continue to operate separately for the next six months before combining in new offices.