Analyst: Finsbury MBO is 'credible' but sources urge caution

Reports of a management buyout of Finsbury from WPP are "credible" and "very feasible", industry experts have told PRWeek, although sources have cautioned about the imminent likelihood of such a move.

The Financial Times reports that Finsbury founder and chairman Roland Rudd (pictured) has approached WPP about a possible MBO, according to "people familiar with the matter".

Rudd has held discussions in recent weeks with agency partners and WPP directors about how such a deal may work, the FT reports, with "one person close to the talks" valuing Finsbury at more than £100m. The source said Rudd and his partners would need to raise a large proportion of outside capital to finance a buyout.

The newspaper cites one source saying Rudd, who founded the business in 1994 and sold it to WPP in 2001, may look to acquire an equity stake back from the holding company.

WPP CEO Mark Read has previously announced a sale of "non-core" assets at the holding company, such as a stake in its data analytics business Kantar, to simplify the sprawling group and cut debt.

Ian Whittaker, an analyst at Liberum, told PRWeek he thought a sale of Finsbury to Rudd is "credible".

"You can see a situation where Rudd would want to take it back," Whittaker said. He added that the PR industry "has a history of buybacks" – examples include Freuds moving in and out of Omnicom - and Finsbury "could easily stand alone".

"If WPP wants to raise extra cash and sell down an asset they could live without Finsbury," Whittaker said. "It’s a big name within PR. It’s a big beast but the agency model is moving on."

Paul Georges-Picot, director at Results International, told PRWeek: "Mark Read’s strategy to take back control of WPP and return the network to growth lies in focusing on those businesses that offer services in technology and creativity. Consequently we’ve seen a strategy of consolidation, notably Wunderman and JWT to create Wunderman Thompson, and of divestment of non-core assets.

"Under Read, the network has stripped out the majority of those non-core businesses by volume, if not yet by value. However, this will happen if the sale of Kantar does go ahead later in the year.

"As agency leaders discern a window to buy back their businesses, the rumours around Finsbury do sound very feasible. If the deal does go through, it remains to be seen if the senior leadership in other PR business units will follow Rudd’s lead, but time will tell."

However, the Financial Times says its sources cautioned that the talks were "at a very early stage" and there is "no guarantee" Rudd "would make a firm proposal".

Read also ruled out any further disposals among its PR businesses, including Finsbury, in an interview with City AM in September.

One well-placed source told PRWeek there is "currently no indication" Finsbury is up for sale.

The situation is likely to be complicated by Finsbury's alliance with sister WPP agencies Hering Schuppener and Glover Park Group.

Finsbury and WPP both declined to comment when approached by PRWeek.

The agency's global revenue rose seven per cent last year to $118m (£91m), according to estimates from PRWeek’s Agency Business Report, with UK revenue surging by an estimated 17 per cent (to £35m) on the back of stronger global markets.

Although WPP does not generally provide trading data on individual agencies, its PR and public affairs arm, which includes Finsbury, has been outperforming the company as a whole for some time.

Revenue in the division fell 0.3 per cent on a like-for-like basis in the first quarter of 2019, against a 2.1 per cent decline in the brand consulting, health and wellness and specialist communications arm. PR and public affairs accounted for 9.2 per cent of revenue in the quarter.

Read next:

Sale? Restructure? MBOs? After Sorrell, what next for WPP's £1.2bn PR business?

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