The news that Martin Sorrell has re-entered the ad industry via the takeover of a little-known shell company, Derriston Capital (set to be renamed S4 Capital), naturally has echoes of his acquisition of a wire, paper, and plastics firm in 1985. Of course, that firm is now WPP, one of the world’s largest ad agencies, from which Sorrell was ousted as chief executive just over seven weeks ago.
The most interesting challenge that Sorrell now faces is building a next-generation marketing group without doing too much (further) damage to WPP, where he still remains a significant shareholder.
To start with, he will need a clear platform acquisition, either in the UK or US, which provides access to a range of capabilities, growth, and a level of cash flow.
However, the circumstances of that acquisition differ greatly from his initial acquisitions back in the early days of WPP, where he notably acquired JWT – a business 13 times the size of his own. In fact, within its first two years, WPP made 16 acquisitions – something that he is unlikely to be able to repeat in 2018.
First, tech and digital businesses enjoy notoriously high valuations, so it’s going to be financially more challenging. Second, the market is far more competitive. The likes of Facebook, Google, and even the consultancies are threats Sorrell didn’t have to consider back in 1985, and they will ensure it’s critical for him, personally as much as anything, to get the first acquisition right.
Through his own personal brand and extensive network, he is not likely to find it difficult to identify potential acquisition targets.
However, the combination of relatively limited amounts of money being available to his new firm, his likely desire to bring together more than one discipline, and a far more competitive market will mean potential targets that meet the criteria will be fewer and further between than might initially be expected.
So what will he be looking for? As well as the access to data, analytics, and content that he has referenced, strategic, channel planning, and performance marketing capabilities will also be key. Widespread disruption within all sectors, from entertainment to retail, means the ability to deliver agile, multi-disciplinary (but digitally-centric) marketing solutions is being readily demanded by brands, small or large. Any acquisition will need to demonstrate that offering.
With this in mind, the greatest chance that S4 has is if Sorrell can build something smaller and more perfectly formed than WPP, which found that its size had started to work against itself, with silos and organisational barriers (such as incentive schemes) getting in the way of collaboration.
While the early acquisition strategy of WPP was right – to blend marketing services under one roof providing an easy one-stop-shop for brands – it increasingly lacked agility, and instead offered a service that began to reflect its structures, rather than the needs of its clients.
And today, clients are no longer looking for a one-stop-shop solution, but rather a flexible team designed around their specific needs. This team must provide high-quality strategy and creative frameworks that can be consistently executed across channels, while leveraging data and technical innovations where appropriate.
Thus, I would expect a much more entrepreneurial model to emerge from S4 that focuses on putting multi-disciplinary solutions together at an agency or country level – rather than holding company – therefore ensuring that they are designed around current client demands, not legacy agency structures.