WPP Group : advertising & marketing profile

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British marketing giant WPP overtook long-time rival Omnicom for the first time in 2008 to become the world's biggest marketing group, as well as the most profitable. It has retained that position ever since, with revenues reaching a record high of $19.4bn in 2016. However, a sharp downturn in performance during 2017 was followed in early 2018 by an allegation that WPP's creator and CEO Sir Martin Sorrell had misused corporate assets, a charge he strenuously denied. With WPP's share price already in freefall, Sorrell stunned the global advertising community by resigning from the group he had assembled almost single-handedly over the space of 33 years. WPP owns four of the world's largest advertising agencies in J Walter Thompson, Ogilvy & Mather, Young & Rubicam and Grey. These are partnered by three global media networks Mindshare, Mediacom and Wavemaker, under the overall banner of GroupM. WPP also controls a substantial portfolio of market research, PR, direct marketing, design and consultancy subsidiaries. Whereas some rivals, like Omnicom and Interpublic, have largely avoided large acquisitions in recent years, WPP continued steadily to expand its portfolio in the 2000s, reinforcing Sorrell's reputation as arguably the industry's most skilled dealmaker. Among the more significant recent additions to the collection were digital advertising network 24/7 Real Media in 2007; global research group TNS, acquired during 2008 after a long and sometimes bitter siege; and top German marketing group Commarco, snapped up in 2011. The group's last $500m-plus acquisition was AKQA in 2012, but it continues to hoover up smaller businesses around the globe at an average rate of one a week during 2015, a year which also marked WPP's 30th anniversary.

Who are the competitors of WPP? See ranking of Leading Global Marketing Groups

Who are the clients of WPP? See individual agency profiles below for more

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J Walter Thompson

Other Agencies

Johannes Leonardo Asatsu-DK
Bates 141 United
Soho Square Santo
Tapsa LG Ad

Media

Group M KR Media
24/7 Real Media Kinetic

Public Relations

Chime Communications The Wexler Group
Ogilvy PR Buchanan Communications
Cohn & Wolfe RLM Finsbury

Design & Branding

The Brand Union Scott Stern
Coley Porter Bell Warwicks
Banner McBride BrownKSDP
Addison CB'a
BDGworkfutures icon
Lambie-Nairn

Direct & Relationship Marketing

OgilvyOne Syzygy
Geometry Global Concept!
Einson Freeman RTCdirect

Specialist Communications

Clockwork Capital Global Sportnet
Metro Group Spafax Airline Network
DigiReels Forward
Prism The Food Group

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 12th Jul 2018: Sir Martin Sorrell's S4 Capital completed the acquisition of creative production network MediaMonks, shrugging off a legal threat from WPP and a rival bid from Accenture. Sorrell originally opened talks with MediaMonks late last year while he was CEO of WPP. The latter has complained that he is, as a result, now in breach of the terms of his exit from the group. He was, claims WPP, "privy to extensive WPP confidential information which he was only able to acquire through his role at WPP". As a result, WPP wants to strip him of his remaining £20m in share awards. No deal price was disclosed, but MediaMonks had been seeking offers in excess of €300m, a little under three times annual revenues, and 15 times earnings. According to the official announcement, "The merger represents the first move by S4 Capital to create a new era, new media solution embracing data, content and technology, which meets client needs in an always-on environment.... Subsequent emphasis will be placed on further platform development, data analytics and digital media buying, run on a single P&L basis, as clients are increasingly demanding." One additional benefit of the deal is that Sorrell gets a new business card and a new job title: Senior Monk at Media Monks. So much more exciting than £20m in share rewards.

Adbrands Weekly Update 5th July 2018: It didn't take long for the truce between Sir Martin Sorrell and WPP to fall apart. Both now appear to be involved in a tug of war over a potential acquisition. At the beginning of the week, Sorrell was reported to have targeted Netherlands-based MediaMonks as the first acquisition for his new S4 Capital vehicle. The company is a creative-led digital production agency with a network of 11 offices in Europe, the US, Latin America and Asia. The expected price tag will be €265m - €300m. Within a day or two, though, it transpired that WPP was also bidding for the business (and so too may be Accenture). It quickly got fractious. Several sources report this morning that WPP has threatened to strip Sorrell of his £20m of remaining share awards if he proceeds with his bid, since it could conceivably put him in breach of his exit agreement. A source "close to Sir Martin" told the BBC "If WPP is going to start some sort of procedural process, Sir Martin will fight it. But this guy is worth £400m to £500m. He is not going to allow £20m to stand in the way what he is trying to do." None of the interested parties has gone on the record on the rumours.

Adbrands Weekly Update 14th Jun 2018: Does it really come down to this? Sir Martin Sorrell "strenuously" and "unreservedly" denied reports published in the Wall Street Journal and Financial Times this week that at least one instance of the alleged misuse of company assets that prompted an internal investigation at WPP and his subsequent resignation related to one or more payments to a prostitute, apparently funded out of expenses. The WSJ was the first to break that information, quoting "people familiar with the matter". According to a lengthy subsequent investigation in the Financial Times, a WPP employee claims to have seen Sorrell entering a brothel in London's Shepherd Market, and later reported the incident to a senior colleague. Both Sorrell and WPP have refused to divulge any further information on the subject of the internal investigation, citing non-disclosure agreements and data protection, but Sorrell's representatives issued a statement in which he again "strongly denies any misuse of company funds for any purpose". A friend of Sorrell suggested to the media that this latest report was merely a scurrilous rumour invented by "a disgruntled employee". That may well be the case. According to the Financial Times, there was no shortage of these. Their article revealed a wider pattern of grandiose and unattractive behaviour by Sorrell at WPP including "routine verbal abuse of underlings", especially his team of executive assistants in London and New York, who were often shouted or sworn at. "He was brutal and inhuman in how he dealt with his assistants," one former executive told the FT. "He would say 'you're f-ing idiots, what's f-ing wrong with you'... He had a real dark side." There was also, according to the FT, "a blending of Sir Martin's corporate and private life that jarred with some colleagues", especially since many corporate perks were also allegedly extended to his wife. According to the FT, "some insiders say they often found it hard to discern when he and his wife were travelling for business or pleasure - and whether it was appropriate that the company picked up the tab." The FT article prompted WPP's current co-COO Mark Read to issue a communique to all staff reassuring them that "all WPP working environments must be places where people feel safe and supported. They must also be places where people are able to raise concerns if they want to, and where those concerns are dealt with when they need to be."

Adbrands Weekly Update 14th Jun 2018: Separately, WPP announced the departure, finally, from the group's payroll of Gustavo Martinez, the former CEO of J Walter Thompson, who was the subject of a protracted lawsuit brought by the agency's chief communications officer Erin Johnson for inappropriate behaviour. WPP took the decision to fight Johnson's allegations rather than settle the case quickly and quietly. Martinez was transferred to his home country of Spain. Although WPP denied it was the case, he listed himself on LinkedIn as WPP's country manager there. That lawsuit hung over JWT's activities and performance for two years before being abruptly and unexpectedly settled just before news broke of the investigation into Martin Sorrell. WPP's interim co-leaders Mark Read and Andrew Scott have taken the decision to draw a line under the whole sorry saga. "Gustavo Martinez and WPP have agreed it is in the best interests of both parties for him to pursue his career outside the group."

Adbrands Weekly Update 31st May 2018: Sir Martin Sorrell is back in business, just six weeks after his abrupt departure from WPP. Sky News was first to break the news that he has arranged to acquire publicly quoted shell company Derriston Capital, nominally a specialist in medical technology, through a reverse takeover by his own investment company S4 Capital. That move would be almost identical to the process whereby he acquired Wire & Plastic Products, a maker of shopping baskets, in 1986 and made it the vehicle for a hostile takeover of J Walter Thompson the following year. Sorrell has received commitments for around $150m of institutional funding for his new venture and is expected to end up with around 30% of the final company, and the title of executive chairman. The two other newly appointed co-directors are Sorrell's long-time advisor Rupert Faure Walker - who has worked with him since the JWT deal - and investment manager Paul Roy, currently chairman of Sky Bet. The new group intends to "build a multinational communication services business, initially by acquisitions". Expect fireworks.

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Background

Free for all users | see full profile for current activities: British-born Martin Sorrell began his marketing career working for sports rights guru Mark McCormack at IMG, shortly after leaving Harvard Business School. He joined Saatchi & Saatchi in 1976, eventually rising to the role of finance director. In the early 1980s it was Sorrell who arranged the funding that allowed the Saatchi brothers to embark on their big acquisition spree, initially in the UK and then in the US. As a result he gradually replaced Tim Bell, who had previously been the Saatchis' right hand man, as the effective "third brother". However while the Saatchis were putting together their biggest deal of all, the takeover of Ted Bates, Sorrell was setting up his own business on the side.

In 1986, Sorrell acquired a large stake in Wire & Plastic Products, a small publicly quoted manufacturer of shopfittings and supermarket baskets, and resigned from Saatchis to begin assembling his own group. Wary of this potential rival, the Saatchi brothers attempted to keep a controlling hand on the new enterprise by offering to provide 20% of its capital. Sorrell declined, but did agree to sell the brothers a reduced 10% shareholding. He then set out to use WPP as his vehicle for growth, picking up a handful of small marketing services businesses. By 1987, Saatchi's was facing serious repercussions from its Bates takeover as clients deserted the US agency. Meanwhile Sorrell was secretly buying shares in another US agency, J Walter Thompson. In June 1987, Sorrell made an unprecedented hostile bid for JWT. Though rebuffed by the US giant, Sorrell refused to take no for an answer, eventually raising his offer to £352m. At this level, JWT's board was forced to concede defeat. It was a staggeringly audacious deal. JWT's sales at the time were over £400m, while WPP's were a paltry £24m. But the business community was amazed by Sorrell's skill and nerve, agreeing to support the highly leveraged purchase. WPP's share price soared. The Saatchi brothers quickly took the opportunity to sell their 10% stake, convinced that Sorrell's huge ambition would come crashing down to earth.

In fact the crunch came sooner than anyone had expected. Only three months later, the world's financial markets were devastated by the stockmarket crash which became known as "Black Monday". Share prices for all companies fell dramatically, but WPP was particularly hard hit, virtually halving. Nevertheless the company continued spending, funding payments on its increasing borrowings out of the cash flow of other newly acquired companies. Conquest was set up in 1988 to service international clients, and this was followed by the purchase of Ogilvy & Mather in 1989 for a cool $862m in cash. The capture of O&M made WPP the world's biggest marketing group (overtaking Saatchi & Saatchi) but it left a huge £650m debt. A year later the Gulf war crisis sparked off another near-recession. This time WPP's financial position was far worse than it had been four years earlier. For much of 1991, the group was very close indeed to collapse. The only thing that persuaded WPP's bankers to hold their nerve was the fact that Sorrell himself agreed to invest £2m of his own money as a gesture of his absolute confidence in the company's credit-worthiness. Meanwhile, as WPP struggled to keep its head above water, it was overtaken by the growth of Omnicom and IPG, who pushed the British group into 3rd position.

In return for his personal investment, Sorrell put in place an instalment incentive package designed to reward him and his management team handsomely if WPP returned to full financial strength. He set about this with great energy, acquiring or investing in a huge number of additional companies, mostly in the marketing services sector. WPP was an early investor in digital media, building up a strong portfolio of new media content and consultancy businesses. By mid-1999, Sorrell's efforts had lifted WPP into the FTSE ranking of the UK's top 100 companies. At the same time, his personal incentive package matured, netting him almost £38m in WPP shares and cash.

Later the same year Sorrell unveiled a new incentive package for WPP's senior management. In return for reinvesting $20m in bonuses and cash back into WPP, the new scheme promised to pay out another $100m in bonuses to senior managers, including $30m to Sorrell, if WPP's total shareholder return by 2004 was among the top two in a ranking of 15 similar marketing services companies. Capping a great year, Sorrell was knighted for his services to the marketing industry. According to Prime Minister Tony Blair, Sorrell was one of several figures (among them Richard Branson) honoured because they had "left a mark on the century and will be beacons for the next century".

The next few months were comparatively quiet for WPP, although it continued to add a string of small marketing shops to its portfolio. The next big move came in Spring 2000, on the back of strong financial results for the previous year. In April WPP made a friendly approach to Young & Rubicam, offering the US agency's shareholders a one-third stake in a merged group, which would once again overtake Omnicom and Interpublic to become the #1 global marketing conglomerate. However Y&R's management team was not immediately receptive, and instead put in place a secret "white knight" deal with smaller rival Publicis, before tentatively agreeing to negotiations with WPP. The implication was that Y&R would talk to WPP, but on its own terms. If WPP's takeover bid went hostile, Y&R would merge with Publicis instead. By early May it looked as if Y&R had slipped off WPP's hook, and the company finally unveiled its plan to merge with Publicis. But shareholders were very unhappy with the new development, citing the very unsuccessful previous alliance between Publicis and FCB. At the same time Ford, a key client of Y&R, refused to back a deal with the French agency because of its affiliations with rival Renault. However Ford did already work with WPP's O&M network... Y&R was forced back to WPP's negotiating table and the deal was finally completed mid-month.

Meanwhile, WPP announced plans to launch a fourth global advertising network, rolling out the hitherto low-key Conquest brand globally. Singapore's Batey Ads and US-based Cole & Weber joined Conquest's 14 existing European offices to target medium-spend advertisers looking for global representation. The network was rebranded as Red Cell in early 2001. The group continued to complete a series of smaller deals that year, adding to its portfolio of marketing services companies, but it wasn't long before Sorrell was tempted to launch another big takeover. In summer 2001, WPP intervened in Havas Advertising's agreed merger with media group Tempus, launching a hostile counterbid. (See Tempus profile for more). Despite later attempts to pull out of the bid, WPP was confirmed as the new owner of Tempus by year's end.

In 2003, WPP snapped up failing British marketing group Cordiant Communications for a rock bottom price of £10m, a far cry from the £1.5bn at which it was once valued. WPP also took on Cordiant's £256m of debts. The acquisition was confirmed in late June 2003 after a brief skirmish with rival bidder Publicis. After initially attempting to force Cordiant into administration, Publicis withdrew from the fight, possibly because of indications that BAT and Pfizer, Bates Worldwide's last major clients, might not transfer their accounts to the French company. In September 2004, WPP was named the winning bidder in a contest to acquire Grey Global Group. The final bid was worth around $1.3bn net, split between cash and shares. A year later WPP was also linked to a possible bid for media service and research group Aegis. WPP was said to be interested primarily in Aegis's market research division, Synovate. The Carat and Vizeum networks would have been sold on to private equity group Hellman & Friedman. Any such speculation proved purely academic however. WPP eventually pulled out of any deal as a result of a fine display of brinksmanship by rival Aegis investor Vincent Bolloré.

Also in Autumn 2005, WPP generated some less welcome headlines after global creative director Neil French, already renowned for his outspoken opinions, made some ill-advised and apparently sexist comments about women in advertising at a marketing conference. As part of a speech criticizing women in advertising for spending too much time on childbearing and too little on hard work, he was reported to have said "Women don't make it to the top because they don't deserve to. They're crap." After a resulting barrage of negative media comment, he offered his resignation to Martin Sorrell in October 2005. Martin Sorrell himself made headlines that year after the terms of his divorce a few years earlier became public. The £30m payout to his former wife set a new UK record for a divorce settlement.

Another set of headlines followed in January 2006 after WPP instituted an investigation into possible fraud at its Italian operating business. Local manager Marco Benatti was fired at the beginning of the year. This led to further unwelcome attention on Sorrell's private life. A series of anonymous emails were circulated to media publications and WPP clients publicising the personal relationship between Sorrell and another WPP Italy employee, Daniela Weber, and also alleging financial impropriety. The emails appeared to originate from Fullsix, a digital agency founded by Marco Benatti and in which WPP was a minority shareholder. Sorrell and Weber later issued a lawsuit against Benatti and the managing director of Fullsix for libel and invasion of privacy. The case came to court in London in March 2007. Benatti offered compensatory damages without admitting his guilt. A subsequent lawsuit over his dismissal was settled privately out of court. See full profile for current activities


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