The king of Farm Street: MARTIN SORRELL - Is WPP about to go shopping? And is Y&R next on its shopping list? Caroline Marshall asks the man in charge

Where do we stand on Martin Sorrell? There seems to be a full gamut

of views ranging from ’cost-cutting financier’ to ’genius businessman in

almost everything in touches’. His fans say that he has been

underestimated, too frequently dismissed as the grey numbers man with

the mind-boggling incentive package. His critics include those who

continue to question whether he has ’enriched’ the industry since he

bought J. Walter Thompson and Ogilvy & Mather. Meanwhile, as the

fifth-best performing FTSE 100 index stock in the past five years, WPP’s

track record speaks for itself.

In any case, Sorrell seems impervious to his critics. He has very strong

views on pretty much everything, which he’s prepared to defend

vociferously, and he patently enjoys doing just that. He’s the perfect

interviewee: direct, no-nonsense, none of that steering the conversation

towards his pet subjects malarky, only getting narky when deliberately

crossed or probed. So naturally we start with why his arch rival,

Omnicom, is considered more attractive than WPP to potential

targets.

While both groups are equally convincing about their strategic purpose,

there is a feeling that Omnicom manages the people process, the

sensitive dealings with iconoclastic agency entrepreneurs and their

advisers, much better; that WPP turns utterly ruthless once it’s snared

its target and that the trait must come from Sorrell himself.

’That depends who you talk to,’ he retorts. ’I know that Shire Hall (the

UK’s largest healthcare agency, acquired by WPP last month) looked at

nine companies before going with us. But our vision is different to

Omnicom’s; we want people to have the benefits of being part of WPP. I

don’t know how well Omnicom plays the creativity card but I don’t think

it’s a long-term strategy, it doesn’t add value to the constituent

parts, which is the whole reason for advertising and marketing services

groups to exist.’

It’s more than three years since Campaign’s last major interview with

Sorrell. On that occasion he spoke of creating MindShare by pooling the

media buying and planning functions of O&M and JWT. This time, with

Irwin Gotlieb poached from MediaVest Worldwide (Campaign, 3 September)

and briefed to ’make MindShare happen’ in North America, the focus of

interest is back on the agencies - JWT, O&M and Conquest.

We start with JWT. A year ago it was destabilised by the loss of Sprint

(to McCann-Erickson) and Dell (to BBDO) coupled with the effect of

extensive management changes in New York, Chicago and San Francisco.

In February this year Charlotte Beers - previously the chief executive

of O&M from 1992 until 1996 - was appointed on a two-year, part-time

contract as worldwide chairman of JWT. It was a support role to JWT’s

chief executive since 1997, Chris Jones. But it had a single serious

purpose: get new business. However, none of JWT’s recent run of

new-business successes - they include Qwest, NTL, Kimberly Clark, UDV

and Miller - came as a result of Beers’ legendary list of client

contacts. Seven months after her appointment, tellingly perhaps, all

Sorrell will offer on the subject is: ’It’s very early days. Too early

to judge.’

What’s the difference between the JWT of today and JWT when Burt Manning

was in charge? ’Unfair question,’ says Sorrell. ’Burt ran the agency at

a different time.’ When pressed, he suggests that Jones has taken a

broader view of JWT as a business and of the industry than his

predecessor: ’JWT under Chris is probably more aligned to WPP’s strategy

and structure than was the case under Burt. Chris has attached great

importance to Thompson Total Branding and rightly so.’

Why, then, can’t JWT seem to put its direct offering in place, while its

sister network, O&M, has such a strong direct brand in OgilvyOne?

Sorrell says: ’Thompson has a direct business under various names around

the world and it needs to be strengthened further: Chris is working on

that. And O&M is lucky in that David Ogilvy was strategically astute

enough to focus on the direct business from the moment it was

founded.’

Sorrell rebuts two further questions on O&M with a characteristic, if

implausible, ’I have no clout in this organisation’ kind of a shrug.

How’s Paul Simons, the new chairman of O&M London, doing? ’Ask Mike

Walsh (O&M’s European chairman).’ Would WPP consider moving O&M London

out of Canary Wharf and back into civilisation? ’Mike’s decision, not

mine.’

He is more forthcoming on the impact of the death in July, at 88, of

David Ogilvy, the founder of the Ogilvy Group. ’David was long gone from

the agency in terms of direct influence, and we all miss his memos which

I used to annoy him intensely by answering immediately,’ he says. ’In a

strange way I think his death has had a galvanising effect on O&M,

making people conscious of their heritage and of David’s

farsightedness.’

And so to Conquest, the European network which was founded by WPP in

1982 and built around the concept of servicing European-based

multinational clients. Alfa Romeo still accounts for almost a fifth of

its revenue.

Conquest has a French chairman, Dominique Simonin, and an Italian chief

executive, Luca Lindner. Fast-growing, it still accounts for less than 2

per cent of group revenue. Sorrell’s plan is to turn Conquest into a

mid-sized network on the back of partnerships in North and Latin America

and the Asia Pacific region. So far, in theory at least, he has one of

the three partnerships in place via WPP’s 30 per cent holding in the

Asian Batey network, which will rise to 80 per cent over the next five

years.

It is surprising to hear Sorrell argue in favour of the mid-sized

network.

It flies in the face of recent advertising history where the likes of

GGT, Chiat Day, TBWA, Hill Holliday, Ammirati & Puris and Rainey Kelly

Campbell Roalfe have been snapped up by the major groups. The

irresistible whiff of money, combined with the superior geographical

resources of the big boys, have seen even the most dedicated advertising

entrepreneurs succumb. So why, in Sorrell’s view, has a mid-sized

network positioning emerged?

’As in every market, if things polarise too far a gap opens up,’ he

says.

’And one of the theories we’ve always had is that our profitability,

just like our clients, follows the old 80/20 rule. In other words, 20

per cent of the offices provide 80 per cent of the profits. So perhaps

there is a positioning for a network focusing on the big advertising

markets with offices in New York, Detroit, Chicago, LA, Sao Paulo,

London, Paris, Frankfurt, Milan, Madrid, Tokyo, Hong Kong and

Sydney.’

How would such a network cover the remaining 80 per cent of the

offices?

Sorrell has considered the idea of franchisor relationships, but admits:

’It’s hard to find a mechanism that’s perfect. It would only work on the

assumption that the franchisor immediately responded to the demands of

our clients whether they were multinational or local.’

Observers look at WPP’s structure - the trio of advertising agencies,

MindShare and other media interests, prominent research and PR brands,

numerous specialist marketing communications companies - and question

where the next acquisition will come from. There are fresh bid rumours

emerging every week - will True North bid for Bates or Grey? Is MacManus

flirting with Interpublic and/or Publicis? - and WPP currently features

prominently in the global mating gossip as a suitor for one of ’the big

five’, namely, Young & Rubicam.

Having floated last year, Y&R (gross income $1.5 billion) would be a big

bite to chew off for even the most voracious of suitors. Employing the

famous old Saatchi technique of wishful thinking out loud, Sorrell

teases: ’I think WPP and Y&R would be a formidable combination,

absolutely formidable.’ However, he denies that any formal approaches

have been made and that he or WPP owns any Y&R shares.

For WPP the deal certainly looks seductive enough, principally because

it would gain access to further Ford business including the portion Y&R

won from O&M last year. And Y&R, though a strong brand with good global

spread, is relatively deficient in senior management since the flotation

tempted some senior executives to cash in and leave.

There are two stumbling blocks. First, Y&R’s management has never

declared itself open to Sorrell’s blandishments. In fact, he admits,

’they hate it when I suggest that the only difference between WPP and

Y&R is that we’re multibranded and they’re unibranded’.

Second, would Unilever, a leading WPP client, entertain the conflict

with Y&R’s Colgate business? Maybe, given that Unilever’s attitude to

conflict is reported to follow the P&G model, which theoretically allows

holding companies to handle rival brands at sibling shops and frees

sister shops to handle competitors’ brands in other agencies.

In any case, buying a network as big as Y&R runs against the recent

grain at WPP. The story has been one of improved margins, revenue

growth, cost control (’control, not cutting’, Sorrell stresses) and

fiscally prudent acquisitions secured mostly for cash, not stock. Some

of Sorrell’s managers would like to see WPP making bold acquisitions and

taking fewer investment stakes: ’Too many people can say ’Sorrell’s my

smallest shareholder’,’ quips one insider.

’Sometimes people don’t want to sell us more than 20 per cent,’ he

retorts.

’And sometimes we don’t want to get involved 100 per cent because we

don’t know enough about the people. We’re trying to position WPP as an

investment portfolio, to add value by taking positions in the growth

areas by geography and function. We’re likely to end up better off that

way.’

Three investments WPP has made recently bear particular scrutiny. The

first, in Tempus, was a tactical purchase of about 14 per cent, secured

when WPP bought a disgruntled shareholder, Blugroup Holding, whose sole

asset was its stake in CIA. WPP has since increased its stake to 19. 8

per cent - a figure which CIA’s chairman and founder, Chris Ingram,

continues to regard as an affront. While Ingram sees plenty to dislike

in WPP and its founder, Sorrell is undeterred: ’We want to build the

finest media planning and buying company in the world and in the long

term CIA could become part of that. Chris Ingram may not want it but

other people in his organisation do.’

Chime Communications was more strategic. Two years ago, WPP paid #15

million for a 29.9 per cent stake in Tim Bell’s PR operation and Chime

simultaneously bought HHCL & Partners. Bell is chairman while Piers

Pottinger, Chime’s joint chief executive, runs the PR operation. Rupert

Howell runs the advertising operation and is joint chief executive of

Chime. Sorrell talks of this deal in terms of people: ’The opportunity

to work with Tim, Piers and Rupert was too good to miss.’

Then there’s Asatsu, the third-largest Japanese advertising agency

behind Dentsu and Hakuhodo. WPP bought a 20 per cent equity stake in

Asatsu a year ago and the Japanese company took a reciprocal 4 per cent

stake in WPP.

The plan is for MindShare to work with Asatsu in Japan and Asia on media

planning and buying and to rationalise Asatsu’s agency businesses in

Asia.

In equity terms, however, it is a standstill agreement: ’I wish we could

go further but that was the quid pro quo,’ says Sorrell. Nonetheless,

Asatsu was a coup: it’s critical to have a presence in the world’s

second-largest advertising market though western agencies were

traditionally unable to build businesses there. (The Japanese had the

same problem in the West.) Until recession opened the door, equity

stakes were rarely offered to ’gaijin’ or foreigners.

Even in these days of digital communications, Sorrell contends that

geographical coverage will continue to be crucial: ’The most intriguing

population statistic is that by the year 2014, 65 per cent of the

world’s population will be in the Asia Pacific region. So some of the

markets that appear unprofitable now will become more important,’ he

says.

What will WPP look like in ten years and will it, as some suggest, move

its HQ from Mayfair’s Farm Street to New York in order to reap the

benefits of a full US listing? On the second point, Sorrell is

dismissive. WPP already has a full listing on Nasdaq so there is no

reason (tax advantages of remaining in London aside) why it cannot have

a full listing on the New York stock exchange as well. ’No, we’re not

going to move WPP to New York. There are about 100 people at WPP, 60 in

London, 40 in New York and a few in Sao Paulo and Hong Kong. Probably

the people who run our companies in New York would like WPP to be as far

away as possible!’

Sorrell’s plan for the structure of WPP in ten years necessitates

action: ’I hope that instead of being 40 per cent European, 40 per cent

US and 20 per cent Asia Pacific, the revenue split will be a third each

way.

I don’t think the web will be a vastly more important part of our

business than now but I’d hope that our non-advertising businesses will

account for a greater proportion of the whole. And I’d like our research

businesses to become more important because, like it or not,

quantitative decision-making makes clients comfortable.’

While further forays into TV programme development are possible, he

dismisses the idea of venturing into Hollywood and the glitzy fields of

rights buying or talent management. ’Talent’s a very risky business,’ he

says. ’I used to work for the sports promoter, Mark McCormack, and he

has a monopoly there.’

In an industry obsessed by size, it’s refreshing to hear Sorrell wax

philosophical about ceding the number one advertising group spot to

Omnicom last year. ’I think I’ve grown up and calmed down a bit,’ says

the 54-year-old who’s just signed up for a further five years after 14

years at the helm of WPP. This should be taken as relative; he’s still

one of the most famous workaholics on the planet.

’Maybe I’ve grown up as a result of what we went through in the early

1990s,’ he muses. Christmas 1991 marked the nadir of Sorrell’s fortunes;

thanks to the recession and the realisation that he had overpaid for

O&M, WPP shares collapsed to just 26p - as Campaign goes to press they

are 610p.

In any case, Sorrell argues that the issue is not size (unless, one

suspects, he is talking about his enormous incentive package): ’It’s can

we be the finest in the industry, not the biggest,’ he says. ’And when

you’re number one there’s only one way to go, after all.’

This article was first published on Campaign