Can Martin Sorrell’s New Venture, S4, Succeed In A Changed Marketing Landscape?

As many expected, former WPP Group CEO Martin Sorrell isn’t quitting without a fight after being boxed out of his company in April.

Sky News reported late Tuesday that the longtime CEO and industry legend had acquired Derriston Capital, a so-called “cash shell” listed on the London Stock Exchange, with plans to turn it into a marketing services group for the “next generation.”

In a reverse acquisition, Derriston agreed to buy S4 Capital, a new entity started by Sorrell that will replace the Derriston name. Sorrell has invested $53 million of his own money into the new venture and raised $15 million more from institutional investors.

The strategy takes a classic page from Sorrell’s playbook. Three decades ago, he started WPP from the public shell company Wire & Plastic Products in 1985 and grew it into the largest ad agency holding company in the world.

Will that same strategy be a winning one 33 years later, when clients are looking for more agile, integrated and digital approaches?

It depends on what S4 acquires and when, said Jay Pattisal, principal analyst at Forrester.

Rather than starting with traditional creative assets and then building data and technology, as WPP did, S4 should start with a robust central data and technology platform and develop creative capabilities around it to avoid silos and redundancies, he said.

“Holding companies are wrestling with trying to streamline and integrate their agencies and resources,” Pattisal said. “S4’s opportunity is to do that from the ground up, without the complexity and the sheer size that WPP is dealing with.”

Strong central capabilities for agencies to tap into will be key for a modern holding company model to work, agreed Greg Paull, principal analyst at R3.

“The holding group will be a far heavier player than they are with WPP, Omnicom and Publicis Groupe at the moment,” Paull said. “Marketers will want a stronger central structure. It’s inverting the model.”

While Sorrell could use Derriston as a shell to purchase a much larger agency, like he did with J. Walter Thompson And Ogilvy in the ‘80s, he’s not necessarily looking to replicate the holding company he built 30 years ago, said Brian Wieser, senior analyst at Pivotal Research.

“That’s just a vehicle on which to build anything,” he said. “It’s like the artist has gone to buy a pen and oil. You don’t know what’s going to come from it.”

Acquisition targets

Sorrell may even try to acquire some of his old company’s assets, or similar ones from competitors. Pattisal predicted Sorrell will go after a holding company-owned media agency due to volatility in the sector, while Paull sees Kantar as a likely target.

“He probably has more flexibility to test, learn and change the structure [at Kantar],” Paull said.

On the creative and production side, Sorrell should focus on emerging channels like voice, VR and AR rather than traditional big-idea shops, Paull added. He could also take a page out of the consultancy playbook and acquire localized creative assets to piece together global capabilities, Pattisal said.

S4 will probably stay away from acquiring ad tech, given the holding companies’ bumpy track record with such endeavors, Pattisal said, but the opportunity to build or acquire a robust data platform is “ripe.”

“The holding companies are all investing in some sort of data platform,” he said. “Those seem to be pretty worthy investments and something S4 will have to acquire or build.”

First and foremost, Sorrell will have to find the right talent to help him build his new venture. He’s more likely to poach from competitors than WPP, however, because he still owns significant shares in the company, Wieser said.

But retention will be key.

“Can he retain the people who are best suited to working with and for him?” he said. “Martin has his admirers and his detractors. Finding that niche of the right asset and circumstances is going to be the challenge.”

This post was syndicated from Ad Exchanger.