4th June 2018
As expected, Sir Martin Sorrell will return to the industry, although perhaps most people didn’t expect him to do so quite so quickly, less than two months after exiting his post at his beloved WPP.
His return as executive chairman of S4 Capital, which has just completed £51m of equity funding (most of which has been invested by Sorrell himself) will see him likely go head-to-head with his former business, of which he is a shareholder, as he aims to build a multi-national communication services business geared for growth.
In reaction to the news, Tony Walford, a partner at Green Square, told The Drum that he saw Sorrell as the industry’s “most famous ‘buy and build’ guru” with acquisition very much expected to drive the new venture from the start.
“The announcement that he’s back is no surprise, but the speed in which he has sourced a vehicle and backing is astonishing,” said Walford.
“What will be very interesting is seeing what his new group will consist – he’s no longer bogged down by legacy agencies, infrastructure or indeed legacy thinking. He has the ability to simply choose what works and dismiss what’s no longer relevant as we potentially enter a new paradigm in how marketing services are delivered to clients.”
Walford identified staffing of both the M&A and strategy teams as one of Sorrell’s first priorities.
“It’s market knowledge he doesn’t have non-compete covenants, but whether or not he has non-solicit restrictions is a different matter. Exciting times and very much looking forward to his first move,” he said.
MSQ Partners chief executive, Peter Reid, questioned how Sorrell would be able to scale the ‘next generation marketing group’ without further damaging WPP where he still holds significant shares.
“To start with, he will need a clear ‘platform’ acquisition, either in the UK or US, that provides access to a range of capabilities, growth and a level of cash flow,” Reid said. ” As well as the access to data and analytics and content that has been referenced, channel planning and performance marketing capabilities will also be key – as will an ability to deliver agile, multi-disciplinary solutions for clients.
“Given the (relatively) limited amounts of money available, potential acquisition targets which meet the criteria will be fewer and further between than might initially be expected – and it will be critical, for him personally as much as anything, to the first one right.”
Also offering his view was Keith Hunt, managing partner at Results International, who expressed his excitement at the speed of Sorrell’s return.
“Sorrell’s name still clearly carries weight, as evidenced by the $150m already promised by investors for the M&A pot,” offered Hunt. “With 75% control of Derriston [the current name of the organization which will rebrand following a reverse takeover] he has the capacity to mold the business as he sees fit – and the new name suggests this is a highly personal venture. At WPP, Sorrell was weighed down by the heritage of a highly traditional marcoms business, with S4 Capital he has a clean sheet and an opportunity to create something truly different.
“The arrival of S4 Capital brings yet another new player to a marketing services M&A landscape that is becoming increasingly competitive. Sir Martin’s stated intention to acquire businesses in technology, data and content can only be good news for independent vendors in these sectors.”
At the time of writing, Sorrell has only provided a brief statement about the formation of S4 Capital, but his track record suggests he’ll be very vocal along the way as he aims to build his new advertising empire.