S4 Capital will be a fascinating experiment in reinvention

31 May 2018  |  David Pidgeon 
S4 Capital will be a fascinating experiment in reinvention

S4 Capital. We’re going to be hearing an awful lot of that name.

This week Sir Martin Sorrell, only six weeks into his enforced WPP retirement and with no non-compete clause in his contract, bounced back with two other septuagenarian friends and a new venture that would rival his old business (never mind that he still has plenty of shares in it)

It’s a feat several analysts described as being performed faster than the speed of light; we all expected a return, just not so astonishingly soon.

S4, named after four generations of Sorrell’s family but sounding like a heavy-duty car lubricant, is now on a mission to build a “next generation” marketing services group and will be acquiring businesses in the data, content and tech space.

That spells good news for independent vendors as Sir Martin, with $150m promised by investors for the M&A pot, sets about building a new empire with Sky Bet chairman Paul Roy and banker Rupert Faure Walker on his very not-so next-generation board.

And the acquisition strategy has worked for Sir Martin in the past - WPP is what it is today thanks to the purchases of agencies such as Ogilvy & Mather and J Walter Thompson in the 1980s.

However, $150m is actually rather modest in the grand scheme of things and it would probably take years to build the scale needed to compete with other businesses. But what S4 is going to lack in scale it would make up for in nimbleness, perhaps allowing Sir Martin to pull some surprise punches against legacy adland firms struggling to reinvent themselves.

In name and mission, the whole venture also appears very personal for Sir Martin who will be desperate to (eventually) end his career on his own terms – and with 75% control of S4, he can certainly shape it as he sees fit.

“Sir Martin has past form, thinks big and makes brave choices, so it’s foolish to underestimate him,” says Guy Sellers, CEO of Total Media, who argues that S4 could end up looking more like a consultancy than WPP.

Whatever form it takes, the chance to start again will be a worthy experiment: how will a brilliant businessman formulate a strategy that accounts for the interruption of businesses like Accenture and the Silicon Valley tech firms into adland from day one?

“At WPP, Sorrell was weighed down by the heritage of a highly traditional marcoms business,” says Keith Hunt, managing partner at Results International. “With S4 Capital he has a clean sheet and an opportunity to create something truly different.”

Meanwhile, Dino Myers-Lamptey, UK managing director, MullenLowe Mediahub, says it is interesting that creative isn’t mentioned in the S4 strategy.

“While this plan is very much still within the creative services, Sorrell has recognised that growth in the market is behind those that are nimbler, more agile and rely on new ways of solving problems, rather than with colourful but volatile personalities and old, cumbersome structures.”

This is the language of the consultancies who are circling around the ad industry, and in many ways making traction.

“Sorrell also would have had the best view of the books across the wide estate of WPP, so we should predict many successful purchases,” Myers-Lamptey adds.

“However, while much of the momentum in these areas will guide S4, Sorrell shouldn’t make the mistake of forgetting that, even with the best technology, data and content, it is still the art of creativity that delivers the abnormal results that the mathematicians can’t quantify.”

The dark cloud

There are other, stranger questions hanging over the entire project.

Sir Martin left WPP following a board investigation into an allegation of personal misconduct - something he denied but chose not to fight. The results of that investigation have seemingly been sealed in concrete and dropped in the ocean, and that lack of transparency has infuriated shareholders. That could have serious ramifications for WPP chairman Roberto Quarta.

How can the new S4 investors be certain that the allegations won’t eventually materialise and damage their new investment? Do they know something WPP’s shareholders do not?


@David_Pidgeon

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