S4 Capital has reported a 25% drop in core earnings after what the group described as a “difficult” 2023. Will things get any easier in 2024? Green Square’s Tony Walford examines its prospects and explores whether a mooted mega-merger could offer salvation. Sir Martin Sorrell is an incredibly resilient character, indeed potentially the most resilient of our industry over the last 50 years. His career includes being ‘the third Saatchi’ in the ’70s, where he completed multiple acquisitions, through to creating WPP in the ’80s (and building it to be the largest marketing group in the world), to creating his current digital group, S4. His career has seen him deal with many issues, from personal slants following hostile takeovers, criticism from institutional shareholders over his employment contract, shareholder revolts over his remuneration, and the famous Shepherd’s Market personal misconduct accusation. The latter led to him being ousted from WPP and creating S4, the vehicle he used to buy the highly regarded creative production outfit Media.Monks and subsequently making MightyHive S4’s first digital media buy. S4 has since completed over 30 acquisitions on a funding model that includes a mix of cash and S4 shares and no earnouts – the idea is the earnout is effectively replaced by the future increase in value of the shares received by those selling in. However, S4’s share price has declined from 878p in September 2021 to today’s 40p, following myriad issues that started with delayed audit reports on fears of poor financial controls and accounting practices, through to repeated profit warnings and worries over Sorrell’s own health. Today’s results announcement was really nothing new – more tales of woe, clients spending less due to recessionary fears, challenging macroeconomic issues, revenues for 2024 anticipated to be down again, but operational profits expected to hold constant. There was no joy in there aside from its debt at £180m being at the bottom end of expectations – a little ray of light in a high-interest rate environment – and a possible first dividend if the second half of 2024 looks good. So, where does this leave S4? There have been rumors of a bid by Stagwell at a premium to S4’s current £240m market value. Sorrell has dismissed this by saying he has not received a credible approach, but surely others must be circling. Despite the current share price languishing around the 40p mark, S4 has some great talent from smart acquisitions. It has a solid blue-chip client base, 10 of which are each delivering over $20m in revenue (albeit a very significant chunk of S4’s revenue comes from the tech sector, which is facing its own challenges) and it has taken action on cost reduction. Thus, it remains an attractive proposition for many competitors that could do with this expertise and client base, which is why I expect to see more approaches over the coming months. It’s hard to see where S4 can go from here on its own. As mentioned earlier, its model has been built on acquisition, buying agencies with a fairly big chunk (up to 50%) in S4 shares. When your share price is 800p+, you don’t have to issue that many to get to a decent value. When it’s 40p, you have to issue 20 times that number to get to the same price. So, S4’s hands are tied unless it’s prepared to significantly dilute – not a very attractive thought. And what will those who took shares at 800p be thinking? Not only has the share consideration element they received dropped by 95%, but they must question if it is ever going to recover. And given S4’s repeated profit warnings, who would want to become part of that group at this moment in time? But you could argue for the share price, the only way is up. I’ve said it before – underestimate Sorrell at your peril. He is the King of Resilience and I hope that the next piece Green Square writes on S4 is a more positive one… not least because I am also a shareholder. Read more
Sectors: Corporate
Green Square advises Given on its acquisition by Anthesis
Green Square Associates is delighted to have advised the brilliant team at Given on their acquisition by Anthesis the largest group of dedicated sustainability professionals globally. Given was founded in 2009 by co-founder and CEO Becky Willan. Its London-based team of 50+ experts work with C-Suite decision makers to define, embed and activate purpose to achieve sustainable, long-term growth. Recent industry accolades include the Corporate Content Awards’ Best Purpose-Driven Content Gold Medal, for its work with IKEA, and the Corporate Comms Award for ‘Best Embodiment of Corporate Purpose’ in acknowledgement of its collaboration with Lloyds Banking Group. The acquisition reinforces Anthesis’ belief that purpose driven strategy combined with robust sustainability capability will help organisations and brands build distinctive, impactful, high-performing businesses. Stuart McLachlan, CEO of Anthesis, said: “Given is recognised as one of the pioneers of purpose as a business strategy, helping to unite organisational stakeholders harness greater meaning through mission, and find superior performance as a consequence. With our growth in purpose-led strategy and transformation, backed by our science-based expertise, we can help more clients move purpose from a ‘nice to have’ to an essential creator of business value. Given has demonstrated the power of purpose for many years with some of the world’s biggest brands. We are very excited to bring this experience and expertise into Anthesis and our broader client relationships.”
Becky Willan, CEO & Founder and Ben Hayman, Executive Director of Given commented:
“Purpose is the foundation of sustainable performance. Purpose-driven companies attract and retain the best talent, are more innovative and build more trusted and distinctive brands. But unlocking the benefits of purpose requires business-wide transformation. That’s why we’re so delighted to be joining Anthesis, to offer unparalleled expertise and scale to support clients at every stage of the journey – from defining a true North Star to guide their business, to delivering real change and impact with the urgency the world needs. We had been approached by several potential acquirers and were uncertain how to establish suitability and whether we would benefit from a wider market process. Green Square quickly understood our business, people and culture, and worked with us to determine the best fit for Given and its team on a strategic and personal level. Working closely with our team, they negotiated an outcome that was great for all parties involved. Andrew and the Green Square team were a pleasure to work with and we always felt they were on our side, working openly with other advisors, and the buyer, to find solutions to the inevitable challenges that arise during this type of process.” Ben Hayman, Executive director, Given added “Green Square’s clarity and direction made a real difference to how all of us experienced the process and, critically, their expertise enabled us to get a better deal.”
Andrew Moss, Partner at Green Square, commented:
“It was an absolute pleasure to work with Becky, Ben, Jason and the team at Given. It’s rare to come across such a well-developed business that has not only maintained its lead in its chosen field of expertise, but also retained its strong entrepreneurial culture. It was this and the unrivalled understanding of Purpose by the Team that made Given so attractive to Anthesis, itself now taking the global lead on the Purpose and Sustainability agenda. A meeting of minds, strategy and chemistry will greatly benefit Given’s clients’, provide growth opportunities for the Given team, and drive international expansion. We look forward to seeing the continued success of both parties during the next stage of their journey.” Anthesis Given Read more
