Shares in M&C Saatchi tumbled almost six per cent today as investors reacted to a boardroom bloodbath that sent shockwaves through adland.
Lord Maurice Saatchi, who founded the advertising behemoth, last night announced that he was stepping down as executive director.
Read more: Lord Saatchi steps down from M&C Saatchi
Fellow Conservative grandee Lord Dobbs, Sir Michael Peat, Prince Charles’ former private secretary, and City legend Lorna Tilbian also resigned from the board.
It came a week after M&C Saatchi’s shares plummeted after it issued a major profit warning and admitted an £11.6m accounting error.
The company had previously said the charge would be £6.4m, but increased this sum following an independent review by PwC.
Chief executive David Kershaw had offered to resign over the crisis, but was told this was not in the company’s interest.
It is understood last night’s resignations were the result of a number of disagreements between members of the eight-person board, and the firm has now launched a frantic search for new directors.
The crisis has sparked speculation of a potential takeover of M&C Saatchi, with Accenture Interactive tipped as the most likely suitor.
However, industry sources played down the likelihood of a takeover, with one citing reservations about the firm’s traditional ad agency model amid a shift to digital marketing.
Russ Mould, investment director at AJ Bell, raised concerns about M&C Saatchi’s governance and accounts issues, as well as a “messy corporate structure” that involved numerous stakeholders.
“This is a business where the assets are people and people have legs – the talent can just quit on you, which they will if they are unhappy or don’t like you,” he said.
M&C Saatchi’s share price had started to claw back some of its losses, but today’s poor trading pushed it back down to around 97p. In March, shares in the ad firm were trading at roughly £4.
In a statement last night chairman Jeremy Sinclair said: “We have accepted the decision of these directors to resign.
“We are determined to restore the operational performance and profitability of the business and are already implementing all of the recommendations set out in the PwC report we announced last week.”