Sir Martin Sorrell was a fixture of the Chelsea Flower Show last month. He stood in the centre of the main drag, so it was impossible not to say hello. The man has lost none of his chutzpah.
Of all the strange aspects of the Sorrell affair though, one of the oddest from a capital markets perspective is his insistence on using a cash shell for his ‘second coming’. Cash shells were all the rage in the 80s and 90s but these days are about as fashionable as big hair and shoulder pads. These days most aspirant business builders can extract vast sums from any number of private equity firms. Is there a risk that Sorrell is living in the past?
Not necessarily. Cash shells may have become a rarity but, properly organised, remain a powerful financing tool. For a start the set-up of S4 Capital means he will be very much the boss. If he had raised funds from KKR or Blackstone, they would have been breathing down his neck.
The beauty of a quoted vehicle is divide and rule. Lots of investors, but only one boss.
The quoted market has its many drawbacks, but it also gives him access to a vast pool of liquidity, bigger than any one PE firm. Equity fund managers are generally long on cash and short on bright ideas, so they should welcome a bold move.
It speaks volumes that Sorrell has asked his old chums Paul Roy and Rupert Faure Walker to join him on the new board. For anyone under 40, they were City titans. Just as crucially they know how to set up a cash shell. For a start they have wisely suspended the shares to avoid hype. Younger generations should watch and learn.
What does all this mean? First, we shouldn’t have to wait too long. Time, politely, is not on their side. Second when the deal comes, it’s going to be big and probably followed in quickfire succession by others. Last, Sorrell will need some fancy footwork to avoid another remuneration row with the governance wonks – and still earn another fortune. While this fox is using one old trick, he’s no doubt using new ones too.
Get the Cabinet to more cocktail parties
If you’re going to throw a party, start with the guest list. This was clearly not lost on Lord (Howard) Leigh, founder of Cavendish Corporate Finance (and a Conservative Party Treasurer) earlier this week when he threw a bash at Lancaster House no less to mark his firm’s 30th anniversary. As I was arriving, a certain Theresa May was leaving, while Philip Hammond gave the congratulations speech. The only notable Cabinet Minister missing was Chris Grayling – perhaps his train was delayed?
Howard has made a very good living over the decades, linking entrepreneurs with business buyers, taking a modest clip in the middle, and giving a fair amount of it to the Tory Party. Unlike a lot of investment banks, Cavendish sticks to its knitting. It only ever acts for the business seller and doesn’t indulge in financial wizardry. Ironically, while he is a devoted Tory, Jeremy Corbyn is doing his firm the world of good with entrepreneurs selling up for fear of a Labour government. Still it was nice to see the current Cabinet turn out to celebrate wealth creators for a change. Perhaps Howard ought to throw more parties, so the politicians could actually meet entrepreneurs rather than just talk about them.
Bridging the gulf
On the subject of knitting and sticking to it, I had breakfast with Phil Shelley, who has just become UK advisory chairman of STJ Advisors after a career working for the Bulge Bracket (Barclays, Goldman et al). The route from big bank to boutique is well travelled by investment bankers, but less so for an ECM man like Phil. In his new role he can actually advise companies on their relationship with investors – fancy that! Proof if any was needed that the gulf between quoted companies and fund managers grows ever wider, thanks to daft regulations like Mifid II. I suspect he is not going to be short of work.
No hand extended to the PR trade - yet
Reading the above, you might think that the PR business is all parties and dinners. Unfortunately not. To prove it, I give you some punchy statistics from the PRCA, the industry body where I am a director. PR is a £13.8bn industry in the UK, employing 86,000 people. That’s three times as many people as in the UK steel industry. It is also a major exporter. Sadly, I haven’t heard from any trade minister offering to help us in this export drive. Maybe a trade mission is in order, preferably to The Seychelles. Or perhaps not. If we ever needed government help, we would really be in trouble.