Martin Sorrell vs WPP: The king of adland wages war on the company he founded with his new venture S4
When a couple break up, sage advice is that it’s best to part ways amicably.
This advice, however, has not been heeded by Martin Sorrell and WPP, the company Sorrell founded in 1985, turned into a global powerhouse, then exited in controversial fashion in April this year.
Sorrell and WPP have been engaged in a war of words since the 73-year-old left WPP, amid allegations of misconduct and bullying staff – and some believe the tit-for-tat battle is unlikely to abate soon.
First up, the pair sparred over the ownership of Dutch production company MediaMonks. Sorrell won it (paying a hefty £266m), despite WPP firing off a legal threat that he’d broken a confidentially agreement with WPP. Then the combative Sorrell came out and questioned the resignation of a WPP board member.
Publicly, Sorrell has distanced his new vehicle S4, launched just weeks after his exit form WPP, as a competitor to WPP, but both are fishing in the same waters and have earmarked tech and data as pivotal to their ad businesses, so it’s difficult not to see their paths crossing.
One analyst believes a bruised Sorrell has revenge firmly on his mind.
Alex DeGroote, analyst at Cenkos said of S4: “This is not a slow burn. It’s going to happen quick. For Sorrell this is going to be three- to five-year play. He is after WPP – big time.”
For now at least, WPP – a top 40 FTSE company by market cap which owns media agency Mediacom, ad agency JWT and PR agency Hill+Knowlton – has more pressing concerns, notably the appointment of Sorrell’s replacement, as it looks to arrest a share price slump which neared a five-year low last month, pivot the business into more lucrative areas and simplify the business to satisfy client needs.
Analysts believe WPP’s new broom is likely to be announced on 4 September, the day of its interim results, which have been pushed back by WPP from August to September this year. This was a delay which analysts read as a WPP strategy to get all its news out at once.
Internal candidate Mark Read, elevated to co-chief operating officer and the public face of WPP after Sorrell’s exit, is favourite, but experts are not ruling out Dentsu Aegis Network boss Jerry Buhlmann – who crucially ticks the “client-centric” box which WPP demands.
Other candidates like Oath’s Tim Armstrong and Andrew Robertson, boss of ad agency BBDO, appear to have fallen by the wayside.
Further board changes could also be announced with executive chairman Roberto Quarta expected to step back into a non-executive role.
“I think they will look to sharpen up the management structure. One of the criticisms when Sorrell was CEO was that there was no bench depth,” says DeGroote while Lorna Tilbian, media banker and non-executive director at M&C Saatchi, suggests a Silicon Valley heavy-hitter could be bought in at chief operating officer level.
Interim results day could also see WPP announce the disposal of non-core business market research arm Kantar to alleviate WPP’s debt, while there is also likely to be an update on the merger of its PR agencies Burson-Marsteller and Cohn & Wolfe.
Sorrell, meanwhile, is in the closing stages of completing the reverse takeover which will see S4 become a public company.
Two executives from MediaMonks will join the S4 board, joining Sky Bet chairman Paul Roy and Rupert Faure Walker.
Sorrell, still a top 10 shareholder in WPP, is thought to be now sounding out friends on advice on other board targets, with a young, digitally-savvy female from the US deemed a priority.
But sources close to S4 said no new board members have yet been approached.
Further acquisitions are likely to come fast, as Sorrell looks to raise £1bn and quickly build an international digital and content marketing services business.
The MediaMonks executives have already tabled a wish list of targets, which they are discussing with Sorrell and few would be surprised if S4 soon made a play for a digital media planing and buying business.
Funding to date for S4 has come from Schroder, Miton, Lombard Odier and Lord Rothschild which have ploughed in £11m behind S4, alongside £40m by Sorrell, £130m raised in an equity placing and a £45m loan from HSBC.
Sorrell has said the “sky’s the limit” for S4 and with WPP also looking to revive its fortunes, it’s difficult not to see the fight raging on.