Martin Sorrell goes on acquisition spree after leaving WPP
Sir Martin Sorrell built the biggest advertising agency in the world with hundreds of companies and 190,000 employees in 3,000 offices and 112 countries. He built WPP, the biggest advertising firm in the world.
However his acquisitions eventually led WPP to a debt load and he was nudged out.
A month after that at 73 he reemerged with a new firm. The template is the same as it was 30 some odd years ago with WPP: First, Sir Martin formed a new investment vehicle, S4 Capital, which got access to the stock market through a reverse merger with a listed company. S4 Capital raised £51 million, most of it Sorrell’s, and announced that it planned to build a “multi-national communication services business” through acquisitions.
Sorrell then sent a letter to the shareholders of S4 seeking their approval to raise up to £1 billion ($1.32 billion) to fund those acquisitions. Two months after exiting WPP, Sorrell succeeded in snatching, from under WPP’s nose, the Dutch digital production company MediaMonks (Accenture, too, bid for it and lost), which had revenues of US$129 million.
According to Business Insider the price was €300 million ($352 million), with around a 50-50 split between cash and shares. A source close to the deal suggested that the valuation was around 30 times historic earnings, a significant multiple of traditional agency acquisitions.
The path that Sorrell is taking is not surprising. He can be described as an accidental advertising mogul. When he set sail on his own in the late 1980s he didn’t plan to become a dragon slayer.
His intention was to purchase small Below-The-Line agencies, those specialized marketing services agencies not involved in the creation of glamorous TV or magazine ads and bypass the traditional big agencies.
It was a good strategy though he later diverted from it as he acquired bigger agencies as the industry consolidated.
Now it seems that Sorrell is back to his original vision, and his plan is to disintermediate creative agencies. A prospectus for S4 notes the decreasing value of traditional advertising as clients demand ever more digital services.
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