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Cordiant's is a tale of sad decline. Once the holding company for the Saatchi & Saatchi and Bates Worldwide networks, Cordiant was the victim of an over-ambitious acquisition drive during the late 1990s. Having demerged the Saatchi network in 1997, the group went on to overspend on a string of other marketing businesses. Cordiant was still independent by mid-2002, but by this time the advertising downturn, heavy debts and a string of dramatic account losses in North America had begun to take their toll. A major restructuring failed to stop the client defections, and the group was forced to open emergency negotiations with buyers in 2003. WPP stepped in to pick up the pieces at a rock-bottom price. Advertising Age had ranked Cordiant as the #9 ad organisation worldwide in 2002 with revenues of $788m.
Cordiant was born in March 1995 in the wake of the acrimonious falling out between the Saatchi brothers and their shareholders. During the 1980s Maurice and Charles Saatchi had succeeded in building the world's biggest marketing organisation, but they paid insufficient attention to day-to-day management, relying on more prudent managers such as Tim Bell and Martin Sorrell to take care of the detail. By the early 1990s, Bell and Sorrell had gone, and the group's costs had spiralled out of control. At the end of 1994, investors led by fund manager David Herro effectively ousted the brothers. A few months later, in a symbolic gesture designed to draw a line under the brothers' involvement in the business, parent group Saatchi & Saatchi Company PLC was renamed Cordiant. (The name was one of several submitted by group-owned branding agency Siegel & Gale, derived from a blend of "accord" and "cordia", the Latin for heart. Cordiant was chosen by new group chairman Charles Scott).
The change of name, however, did not resolve the group's financial problems. Although these were to some extent a legacy of the profligate expansion the group had undertaken under Maurice and Charles, they were exacerbated by the repercussions from the brothers' departure. The most serious of these was the decision by Mars to pull its entire account, worth around $400m in annual billings, out of the Bates network. Four other clients, Gallaher, Mirror Group Newspapers and eventually British Airways and Dixons, followed the brothers to their new agency leaving a significant dent in the old group's billings. Those losses were offset by some new assignments from existing clients such as Procter & Gamble and Johnson & Johnson, but Cordiant's first financial results were poor, showing a loss of $53m for 1995. Even at the height of its problems under the brothers in 1994, Saatchi & Saatchi Company PLC had been able to show a $21m profit.
To prepare for its new life post-Maurice & Charles, Cordiant attempted to set its house in order. A struggling third network within the group, CME-KHBB, was cut loose. The US arm, Campbell Mithun Esty, which had been acquired by the brothers in the 1980s was sold to a combination of Interpublic and its management team. The continental European offices were closed and UK outpost KHBB was briefly re-established as a standalone unit under the new name K Advertising before being absorbed into Saatchi London. Later, ad agency Cliff Freeman and direct marketer Kobs & Draft were sold to management. (Kobs & Draft became DraftDirect, and later DraftFCB). Bob Seelert, a former marketer from General Foods and other companies, was recruited to become the group's new CEO.
Yet the group's past continued to get in the way of a clean start. The most significant distraction was the series of lawsuits which erupted between Cordiant and the Saatchi brothers, centring on various issues, including the latter's plans to call their own start-up agency New Saatchi. Although Cordiant had been keen to ditch the Saatchi name from its corporate title, it had no intention of sacrificing the ad industry's best-known brand altogether, and did not want it tarnished by a rival with a similar name.
There were other problems as well, as the two agency networks attempted to replace business lost during 1995. P&G was by now one of Saatchi & Saatchi's most important clients, and was quick to express its displeasure over any attempt by sister network Bates to pitch for competing accounts. As a result, in 1997, the board decided to separate its two agency networks in order to let them to compete more effectively against each other. Saatchi & Saatchi was demerged as a separate company under Bob Seelert and newly appointed agency CEO Kevin Roberts. A separate entity was spun off under the name of Cordiant Communications Group, under CEO Michael Bungey, with the Bates Worldwide network as its principal business. Shared resources such as the Zenith Media buying and planning network were converted into joint ventures between the two separate companies, and the old Cordiant PLC, formerly Saatchi & Saatchi Company PLC, was wound down.
Yet despite the spread of its Bates Worldwide business, Cordiant had difficulty establishing itself as a multi-national advertising group, not least because it held only one genuinely global client, British American Tobacco, which was itself prohibited from advertising by tobacco regulations. As a result, the company was from the very beginning the subject of persistent takeover rumours. For several years, True North, then parent to the FCB network, was considered the most likely suitor. However Cordiant's chairman Michael Bungey rejected any such deals, and set out to establish the group as a strong independent in its own right. Against the odds, it was the other companies who were acquired: True North by Interpublic, Saatchi & Saatchi by Publicis, D'Arcy by Leo Burnett. As each of these targets disappeared from the map, Cordiant's own apparent value appeared to increase, along with its share price. This gave Bungey the opportunity to mount several acquisitions of his own. In 1999, he acquired professional healthcare agency Healthworld, which was merged into Bates, and spent around $100m on an 80% stake in Korean agency Diamond Advertising, previously a subsidiary of the car manufacturer Hyundai.
This resulted in a sparkling set of financial results for 1999, with revenues of £336m and pretax profits up by almost a third to £32m. Cordiant wielded its chequebook again in 2000, inking two further deals to acquire US technology marketing agency Donino White & Partners (later DWP//Bates Technology) for around $30m, and global marketing services group Lighthouse Global Network for a lavish $592m in stock. The Lighthouse purchase pushed Cordiant a couple of notches up the global ad organisation ladder, with combined billings reaching $10.4bn. Later the group acquired brand communications business Bamber Forsyth and German marketing group InterCom Management. Cordiant's pretax profits for 2000 leapt 78% to £57.5m, while revenues rose to £513m. Advertising and general marketing services each accounted for around 50% of revenues. Further purchases included Bulletin International, an international broadcast public relations consultancy and Gallagher & Kelly Public Relations in Ireland. In early 2001 the group merged its smaller Scholz & Friends agency with Berlin-based TV production company United Visions Entertainment (UVE).
Sadly, this run of success was not to last. The economic bubble of the late 1990s finally burst in 2001 and Cordiant found itself under increasing pressure. By year-end, the group was reported to be in negotiations with its bankers to restructure its $400m overdraft facility. Soon afterwards the Bates network was stunned by the loss of the key Hyundai Motors account in North America. It was to prove only the first of a series of account losses that wiped almost $700m off Bates' US billings within 12 months (see separate profile). Meanwhile it became ever more apparent that the group had paid way over the odds for several of its earlier purchases, especially Lighthouse. After the sparkling results of 1999 and 2000, Cordiant's underlying profits for 2001 more than halved, and a write-off of goodwill relating to the acquisition of Lighthouse led to a whopping net loss of £271m. Six months later the group reported a 30% fall in interim operating profits, a 10% fall in revenues and a net loss for the first six months of the year of over £20m.
In 2002, the rumour mill went into overdrive on speculation that Cordiant and Havas were negotiating a merger, although this was strenuously denied by both sides. In September that year, Cordiant announced a dramatic restructuring, said by many to be designed to increase the likelihood of a buyout. The group said it would combine all of its marketing networks to create a single fully integrated agency under the Bates banner. At the same time, Michael Bungey announced his departure from the group, handing control to David Hearn. Charles Scott, chairman of Cordiant, also resigned and was replaced by Nigel Stapleton, a former chairman of Reed Elsevier.
But it wasn't enough to stem the tide of account losses. In April 2003 alone, the UK arm of Bates lost three of its most important accounts. Almost immediately afterwards the group announced that it had opened "very preliminary" negotiations with an unnamed buyer. Other groups subsequently joined the queue of interested purchasers. Meanwhile the group began to raise much-needed cash through the sale of parts of the business. A 55% stake in Australian marketing group TCG was sold to investment group Pacific Equity Partners in May for around $40m. PR group Financial Dynamics was sold to management for around £26m (and was later acquired by FTI Consulting), and German network Scholz & Friends was sold to investment group Electra.
The sale process was given added urgency when Cordiant's bankers agreed only to extend funding until July. The group's biggest shareholder, fund manager Active Value, put its support behind a management buyout under a new team. However Cordiant's board came out in favour of a trade sale. WPP quickly emerged as the favoured buyer, yet the sale process was repeatedly delayed by manoeuvring from other buyers. Publicis, which had by now become Cordiant's partner in Zenith Media, attempted to force the group into administration in order to get first call on its assets. Later a mysterious Syrian billionaire was revealed to have acquired an 11% stake in the group for reasons which never fully became clear (and subsequently proved an expensive folly), while Active Value insisted on holding out for a management buyout. Finally the whole matter was resolved in July when virtually all Cordiant's shareholders, including Active Value and the mysterious Syrian, agreed to approve a deal with WPP. Cordiant, which had once been valued at more than $1.5bn, was acquired by WPP for just £10m.
Advertising agency Bates Worldwide was largely dismantled, with most offices merged into either JWT or what was then WPP's challenger network Red Cell. Marketing services agency 141 Worldwide, branding and design agency Fitch:Worldwide and healthcare specialist Healthworld continued to operate as separate units for a while. (Healthworld was later absorbed into what is now Ogilvy CommonHealth). Cordiant's last reported group revenues, for 2002, were £533m. Pre-tax losses reduced from £271m in 2001 to £228m; however the business reported an unexpected improvement in operating profit, up 1.4% to £37m, as a result of cost savings. All the group's directors were ousted in the WPP takeover, although not before receiving handsome remuneration for their short-lived services, much to the annoyance of Cordiant's long-suffering shareholders.
Last full revision 2nd February 2018
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