Friday 22 June 2018

'Fall of an emperor' leaves communications giant WPP reeling

Martin Sorrell. Photo: Justin Tallis/AFP/Getty Images
Martin Sorrell. Photo: Justin Tallis/AFP/Getty Images

Kate Holton

WPP, the world's biggest advertising company, entered uncharted territory yesterday, as the departure of its founder Martin Sorrell leaves it rudderless at a time of industry flux.

Before his shock departure, Mr Sorrell had built WPP into a vast, globe-spanning media giant with tentacles in every aspect of advertising, marketing and PR.

In Ireland its dozens of brands include creative advertising agency Chemistry, corporate public relations firm WHPR, market research firms Kantar and Milward Brown, and advertising giant Ogilvy. Carr Communications, one of Ireland's oldest PR firms, is an affiliate. That penetration is replicated in markets around the world.

Shares in the group fell 4pc after Mr Sorrell, the driving force behind 33 years of dealmaking and relentless expansion, stepped down on Saturday after the board investigated an allegation of misconduct.

His sudden departure has sparked questions as to whether the holding group can remain in its current form - as it stands it employs 200,000 people in more than 400 agencies across 112 countries. It has also prompted fears that without Mr Sorrell's contacts it could lose clients and talent while it seeks out a new CEO.

"Sorrell's departure is negative considering ... how instrumental he has been in assembling the assets WPP has today," said Pivotal Research analyst Brian Wieser.

WPP said that chairman Roberto Quarta will step up to be executive chairman while its digital boss Mark Read and Andrew Scott, the chief operating officer of WPP Europe who oversaw acquisitions, become joint chief operating officers.

In March, WPP published its weakest results since the financial crisis as consumer goods groups - such as Unilever and P&G - cut spending and other customers jumped ship.

The industry is also battling the might of Google and Facebook, which dominate the online advertising market, and watching nervously as consultants such as Accenture move aggressively into the sector.

The changing dynamics have meant the previous idea of building marketing groups up to offer advertising, branding, planning and research on a global scale - championed by Mr Sorrell - is now under threat.

Analysts are already saying that WPP's market research arm Kantar could be sold off for around £3.5b, a hefty slice of the overall market value of £14.5bn, and question whether there are synergies from holding PR assets like Finsbury.

Mr Sorrell, 73, did not have a non-compete clause and could set up a new advertising business. He owns 1.4pc of WPP, according to Thomson Reuters data.

Names already in the frame include Jerry Buhlmann, who runs the Dentsu Aegis network, and Adam Crozier who previously ran broadcaster ITV and Royal Mail. Jeremy Darroch, CEO of bid target Sky, and Andrew Robertson, boss of rival ad agency BBDO, have also been linked with the job. From inside WPP Mark Read, 51, is seen as the lead candidate.

David Jones, former CEO of WPP peer Havas, predicted WPP would miss Mr Sorrell more than he would WPP. "No one else can keep that company together the way he has been able to because he built it," he said.

"It's the fall of an emperor and one that I think will not only take the empire down with him but will also have massive ramifications for that entire industry." (Reuters)

Irish Independent

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