Martin Sorrell takes on WPP as he refuses to fade into the woodwork

New York: Martin Sorrell reigned as one of the most influential leaders in the advertising industry for three decades as the chief executive of the marketing colossus WPP. After he abruptly resigned in April after an investigation into alleged personal misconduct, the normally sharp-tongued, frenetic 73-year-old slipped unexpectedly out of sight.

But not for long. By the end of May, Sorrell had created a new advertising company called S4 Capital, which he pitched last month at the annual advertising bacchanal in Cannes. While there, he spoke at events where he defended his reputation and criticised WPP for how it had handled his departure.

Then last week, Sorrell clashed more directly with his former employer, with both vying to purchase the same Dutch marketing firm. Lawyers for WPP sent a letter to Sorrell telling him that he was risking his future stock awards, worth millions of dollars, by aiming to buy the Dutch firm, according to a person who reviewed the letter.

The letter said that WPP started considering an acquisition of the firm, called MediaMonks, in November 2017. Sorrell, who was then still running the conglomerate, “was heavily engaged in this process,” it said. That would make his separate pursuit an “unlawful diversion of a maturing business opportunity from WPP,” and would most likely breach his confidentiality agreement, which would threaten the stock awards, the letter said.

A spokesman for Sorrell said the claims were inaccurate and represented “a weak and feeble attempt by WPP to destabilise” S4 Capital’s bid for MediaMonks. The scuffle has put a spotlight on Sorrell’s ambitions after WPP, which he founded in the 1980s, and his efforts to push past his unceremonious exit.

Revenge or strategy?

“Bidding on the same thing as WPP, is that a coincidence — of all the things in the world?” said Jon Bond, co-chairman of the digital marketing firm Shipyard. “It feels like more of an emotional reaction than a thought-out calculated approach because he’s on the rebound. My question is what’s the strategy, and be careful, because revenge is not a strategy.”

On Tuesday, it was reported that Sorrell’s new venture had acquired MediaMonks Multimedia Holding BV, beating WPP in the auction and setting up a possible clash with the advertising powerhouse. Sorrell’s S4 Capital Ltd is paying the owners of Amsterdam-based MediaMonks in shares of his investment company as well as cash.

Sorrell has referred to his new firm as a “peanut” compared to WPP, which owns more than 100 marketing and communications firms, including Ogilvy and Y&R. He acknowledged his age while speaking at an event in Cannes, saying that he is looking at building the firm for the next five to seven years, at which point he will reassess his physical and mental health.

S4 Capital plans to be publicly traded by using an existing company’s listing. According to a May filing, it aims to “build a multinational communication services business, initially by acquisitions,” with a focus on technology, data and content. Sorrell, who was one of the world’s most highly paid executives while at WPP, contributed £40 million (about $53 million; Dh195.2 million) of the firm’s initial equity funding and is its executive chairman.

The filing noted that institutional investors had indicated they would be willing to provide more than $200 million in additional equity funding for acquisitions.

Massive chip on his shoulder

“I think WPP expected him to be perhaps toxic and therefore not able to raise capital,” said Brian Wieser, a media analyst at Pivotal Research. “They maybe underestimated the degree to which he now has a massive chip on his shoulder and really wants to be able to prove himself.”

It remains to be seen how Sorrell’s exit from WPP affects his new business ventures. In recent weeks, Sorrell has denied a report in The Wall Street Journal that his departure was preceded by a company investigation into whether he had visited a brothel and used WPP money to pay a prostitute.

MediaMonks, a digital production company founded in 2001, has 11 offices globally and about 750 employees that it refers to as “monks”. It has worked with companies like Lego, Google, Bose and Ikea on creative projects from gaming apps to documentaries.

“I still think he will be very successful in attracting agencies,” Greg Paull, a principal at R3, a consulting firm, said of Sorrell. “He’s built so much goodwill in the business, there will be enough entrepreneurs wanting to work with him in a more hands-on structure.”

WPP had not publicly made an issue of Sorrell’s plans until the MediaMonks pursuit. Lawyers for WPP wrote that Sorrell was privy to “extensive” confidential information about MediaMonks, which “he was only able to acquire through his role at WPP”.

WPP’s chairman, Robert Quarta, told The Journal last week that if Sorrell had violated his confidentiality agreements with the firm, which cover acquisitions that it explored while he was chief executive, it could threaten his long-term share award of as much as $26 million.

Bond was sceptical about whether that would serve as much of a deterrent. “I don’t think he cares that much about that,” he said. “He’s in his 70s and made enough money that it’s not going to matter. I think that’s probably not as important to him as winning.”

— New York Times News Service, with inputs from Bloomberg

Martin Sorrell wins the first round

Martin Sorrell’s new venture acquired Dutch digital agency MediaMonks Multimedia Holding BV, beating his former employer WPP Plc in the auction and setting up a possible clash with the advertising powerhouse. Sorrell had outbid WPP and rival suitors for the acquisition, at a price of about €300 million ($352 million; Dh1.3 billion), Bloomberg reported.

MediaMonks, with revenue of about €110 million, plans to focus on platform development, data analytics and digital media buying going forward.

Sorrell’s S4 has a plan to acquire Derriston Capital Plc, a listed shell company, and raise £1 billion of equity for further deals. His new venture has attracted the backing of City of London investors including hedge fund manager Crispin Odey. Still one of WPP’s largest investors, Sorrell has said he’s not out to damage the ad group with his new venture.

However, some other WPP shareholders have criticised the board for not including a non-compete clause in Sorrell’s contract to prevent him from going head-to-head with the company. WPP shares are worst-performing among major advertising companies, as investors fret about its ability to contend with big market shifts, including declining spending by consumer giants and new competition from digital rivals and consultants.

Sorrell’s departure followed a stock plunge for WPP — which has lost almost a quarter of its market value over the past year — and its worst performance since the financial crisis.