Good fortune and Godspeed: Sir Martin Sorrell steps down from WPP ahead of misconduct investigation findings

 
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FTSE 100 advertising giant WPP has been led by Sir Martin Sorrell since 1985 (Source: Getty)

Global marketing giant WPP could be broken up following the departure of its renowned chief executive Sir Martin Sorrell, with City analysts divided over prospects for the firm.

Sorrell’s three-decade tenure at the top of the advertising industry ended dramatically over the weekend as he stepped down from WPP following an investigation into alleged misconduct.

In a statement announcing his resignation, Sorrell said: "The current disruption we are experiencing is simply putting too much unnecessary pressure on the business."

The statement concluded: "As a founder, I can say that WPP is not just a matter of life or death, it was, is and will be more important than that. Good fortune and Godspeed to all of you… now Back to the Future."

Sorrell’s departure comes at a crucial time for WPP and the global advertising industry, with consumer goods giants – the staple of the global advertising industry – cutting budgets and intense competition from digital platforms such as Google and Facebook for advertising spending.

Alex DeGroote, an analyst at Cenkos Securities, said Sorrell’s departure will fire the starting gun on the “orderly break-up” of the conglomerate plus the sale of valuable equity stakes in firms such as AppNexus.

“It’s inconceivable that there’s anyone out there who can run WPP better” than Sorrell, he said.

“He is WPP.”

WPP’s market research division is a prime contender to be snapped up by US rival Nielsen, which could fetch as much as £3.5bn, according to Ian Whittaker, an analyst at Liberum.

Professional services firms Accenture and Deloitte may also be eyeing parts of WPP’s digital arm.

Russ Mould from AJ Bell added: "Some people would say WPP looked like an investment trust of media companies. They were acquired but were they ever really integrated?

"It may be the management team themselves decide they are better off with a different structure... If you have got two heads, maybe they could go in different directions."

Roberto Quarta, WPP's chairman, has been appointed executive chairman until the appointment of a new chief executive. Meanwhile, Mark Read, chief executive of Wunderman, and Andrew Scott, WPP corporate development director and chief operating officer for Europe, have been appointed as joint chief operating officers.

The firm declined to set out a timeframe for the appointment of a new chief executive, with analysts split as to the prospects for a like-for-like replacement.

Some analysts are bullish about the firm's future as a single entity.

Brian Wieser, senior research analyst at Madison Avenue research house Pivotal Research Group, said a new boss could “bring new ideas to the holding company and lead the rebound that we think will eventually occur”.
Media expert Claire Enders told City A.M.: "I think people are overbaking the possibility of dramatic changes in the event of securing a chief executive from the outside.

"I think that someone who comes in will keep the whole empire together and keep it working."

The investigation into Sorrell's conduct, which was only revealed at the start of the month, has now finished, although the findings have not been revealed.

It involved “personal misconduct”, WPP said in a statement, relating to financial impropriety. However, "the allegation did not involve amounts that are material," the firm added.

WPP does not plan to publish the findings, leaving the possibility that shareholders will never find out what triggered Sorrell’s exit.

Sorrell’s resignation brings an abrupt end to a 33-year reign, during which he used a small shopping basket manufacturer, Wire and Plastic Products, as the vehicle for the acquisition of a string of big advertising and marketing firms, including J Walter Thompson, Ogilvy & Mather and Group M.

Sorrell will "be treated as having retired on leaving WPP", with share awards pro-rated and vesting over the next five years, the FTSE 100 firm said.

Overall the 73-year-old could receive a maximum of 1.6m shares if the company hits all of its performance targets, which would be worth £19m at prices at the end of last week.

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