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So long Sir Martin - did the WPP boss jump before he was pushed?

 
Infinox Contributor
SportAccord - Day 4
So long Sir Martin - did the WPP boss jump before he was pushed? (Source: Getty)

Did no-one really see the departure of Sir Martin Sorrell from advertising giant WPP coming?

It’s likely that many people thought he could - and would - tough out the allegations of financial misconduct and the looming threat of investigation.

But at the same time, maybe Sir Martin had had enough. A third of investors were against his £48m pay award for 2016, the company has lost a third of its value over the last 18 months and well, there’s always the old maxim that it is better to jump before you are pushed.

Sir Martin would have undoubtedly wanted to leave on his own terms and that is exactly he has achieved.

He also appears to have negotiated a financial settlement he considers to be fair, and is free to compete with his old firm should he wish to do so.

One wonders whether at the age of 73, and already incredibly wealthy, Sir Martin might not simply want to retire to a nice Tuscan villa rather than start a new company to compete with the one he created 33 years ago.

As it is, his 2 per cent shareholding in WPP means he has a retirement fund of around £20m, notwithstanding the 5 per cent drop in WPP’s share price suffered on Monday morning.

Succession plans

While it’s tempting to assume the share price fall indicates that the market disapproves of Sir Martin’s departure from WPP, investors are more likely to be worried more about the firm’s lack of an immediate successor and overall leadership.

Aside from the loss in the company’s share price, WPP has had to navigate cuts in spending by some of its biggest customers. Procter & Gamble, for instance, has drastically reduced its advertising spending with advertising groups, cutting $750m from its spending since 2015, with plans to cut another $400m by 2021.

Sir Martin himself said WPP took a whalloping in 2017. With online media in the ascendancy and traditional advertising providing diminishing returns, the risk to WPP is that it continues to take a whalloping in the years to come. Having grown so large, it has perhaps become a victim of its own success.

Breaking up is so hard to do

That is perhaps why some market analysts believe WPP will look for a restructuring expert to take over the company. If that should happen, they suggest it is entirely possible that WPP could be broken up.

There are numerous divisions within WPP that could survive quite happily on their own. One such, is Kantar Media, the market research group, which Alex DeGroote, analyst at Cenkos Securities told the Financial Times on Monday, could be sold for up to £3.5bn.

Other brands within the WPP stable include J Walter Thompson and Ogilvy, while WPP has substantial shareholdings in Chime Communications and Vice Media among others.

Whatever the real reasons for Sir Martin’s suddenish departure from WPP, he may be getting out at exactly the right time. While watching something you have built up over 33 years get taken apart by your successor may stick in the craw, Sir Martin will at least be able to say that he was responsible for the majority of WPP’s success.

What comes next is neither his problem nor his responsibility. Given WPP has made him an incredibly wealthy man he might want to consider a career break at least. At 73, after all, most of us would find the idea of a villa in the Tuscan hills quite attractive.

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