Services: Green Square

Currency instability may have the public spooked, but agencies can still find opportunities, writes Nick Berry of corporate finance and advisory practice Green Square. The full political fallout from the mini-budget is yet be seen, but there is no doubt that Liz Truss and Kwasi Kwarteng’s dramatic tax cuts have been the catalyst for further economic turmoil and the weakening of the pound.

The times we live in will be remembered for many things – a pandemic, war in Europe, 1970s-style inflation, a revolving door being installed at 10 Downing Street – but the rise of environmental and social awareness will not become a memory. The manner in which governments, business and individuals balance short-term economic pressures with long-term sustainability and social justice is arguably the most important challenge for our and future generations. We are seeing more people becoming vocal and active across mainstream politics, as well as other forms of disruptive protest to create awareness and drive change. But while specific industries are now clearly marked as targets for the damage they cause, businesses across all sectors are having the spotlight shone on them as never before. Greenpeace’s protests aimed at WPP at this year’s Cannes Lions was both surprising and innovative in equal measure. WPP agencies won two Gold Lions for work with Greenpeace, but this didn’t stop the campaign group from using guerrilla marketing tactics to storm its private beach at Cannes to highlight its dealings with fossil fuel companies. Whether or not these protests work in the short or even medium-term is not the point. No agency – or client for that matter – can afford to brush off these events and think they are immune from being targeted. Business needs to understand that consumers are getting wise to greenwashing, so brands and their agencies can no longer make performative gestures. ESG (environmental, social and governance) standards must be top of mind for agencies and their clients moving forward. In the past, ESG efforts were primarily viewed as good PR to receive favorable media coverage, please socially conscious employees and mitigate risk. Things have moved on since then: ESG considerations are increasingly viewed through the lens of value creation. Just as high and transparent ESG standards will help brands engage with their consumers and help agencies become more attractive to clients, both existing and prospective, with my Green Square M&A hat on I am certain they will also make agencies that are looking to sell appear much more attractive to potential buyers. Following on from the Cannes protest, Silvia Pastorelli from Greenpeace said: “We have nothing against the creative sector. There is a lot of incredible energy and talent, but we would like to see that used as a force for good.” I speak to entrepreneurs all the time and ESG is high on their agenda. Privately-owned businesses across the marketing and creative sectors often have a strong social conscience and have motivated and committed staff that echo the thoughts of Pastorelli. It is genuinely important to them and the cultures they are creating that positive ESG is part of their DNA. This will uphold their values, help them differentiate from the competition, help them attract the best talent and the most prestigious clients. It will also inform their M&A strategy when the time is right to attract the right buyer. With ESG issues near the top of the agenda for governments and the public at large all over the globe, it is now a tangible factor for private equity houses and institutional investors. It is consequently a driver for transactions – in the form of both disposals of risky assets (for example, fossil fuels) and acquisitions of sustainable assets or assets that will help a company achieve its ESG goals (such as renewables, recycling, waste management, tech and aquaculture), as well as B2C transactions. At the same time, ESG factors are receiving more attention in due diligence and deal terms as their materiality increases. And on a purely practical level, there’s also greater regulatory focus on ESG – reflected in the introduction of reporting requirements across the globe (including in the UK, Japan, Hong Kong and China) and moves in Europe to impose new corporate governance and risk management obligations. While reporting requirements have, to date, largely been targeted at publicly listed companies, they are expected to be extended to large private companies in many jurisdictions. It is important, therefore, in the context of private M&A to consider how ESG risks and regulations may affect a company’s reporting obligations, or any plans to exit an investment in the future, through a subsequent disposal or an IPO. An interesting development in recent years has been the rise of B Corp, a non-profit network that seeks to certificate businesses on their environmental commitments, good corporate governance and transparency. The rapid growth in businesses becoming B Corp-certified demonstrates the commitment of many businesses trying to do the right thing and reflect wider societal views. The ongoing benefits of certification are becoming clearer for all kinds of companies: attracting and retaining staff in the midst of a global talent war, attracting new business and winning public favour. There are now thousands of B Corp-certified companies. A random search using the keyword ’advertising’ reveals that there are almost 300 agencies listed on the B Corp website. But ESG is still often overlooked as a lever you can pull to grow value from M&A activity. It does not replace the importance of Ebitda and a strong management team etc, but it can make your enterprise more attractive. There may be acquirers concerned as to whether they can uphold the standards expected of being a B Corp if they take over a certified company. In time, however, the increasing need for larger businesses to prove that their actions speak louder than words should mean savvy acquirers will seek targets to improve their own cultural and commercial commitments and social perception in the market. It was not so long ago that sustainable investment was confined to a small dedicated corner of the PE market. It’s now moving into the mainstream. Sustainability is permeating almost every aspect of private markets. Private equity firms are now integrating ESG considerations across the investment cycle – proven by the fact one in three general [PE] partners have now hired sustainability officers, which is almost double the number from two years ago. Those that that fall behind are likely to face pressure from limited partners and lenders to up their game. In M&A, negative ESG issues – whether related to environmental impact, board diversity, supply chain management or other factors – may affect deal certainty by impacting target valuations in previously unexpected ways. They may also affect the availability of financing for a transaction as lenders and investors increase their focus on these issues. ’ESG due diligence’ is becoming more important for corporate and private equity buyers in M&A transactions. Buyers and advisers need to be savvy in diligence exercises, particularly as monetary or other traditional ’risk’ thresholds may prevent discovery of some ESG issues, such as human rights breaches in the supply chain. Deal protection provisions are another area in which ESG is impacting on M&A transactions. Buyers may request ESG-related warranties above and beyond the traditional scope of ’compliance with law’ warranties. ESG-specific warranties need careful consideration to ensure risk is balanced and any breaches are objectively identifiable. This is especially important if the parties want to utilise warranty and indemnity (W&I) insurance for the transaction. Sellers may also want to protect their reputation post-closing by conducting diligence on the buyer or seeking post-closing commitments as to how the business will be run by the buyer in future to maintain ESG standards. At Green Square, we have been increasingly focussing on sellers’ ESG credentials, as well as their numbers, as part of our assessment and support in preparing our clients for acquisition; this is because we believe that good practice, governance and being proactive in upholding sustainability will create greater value over time. Entrepreneurs need to take note! Read more

Following the profit warning at S4 Capital, Green Square’s Nick Berry warns growing agencies not to ignore the necessary work of building support systems and infrastructure. The revelations about ‘chaotic accounting’ at S4 Capital last month not only dampened its share price and future growth forecasts, but also delivered a timely reminder to businesses of all sizes that it is worth holding up a mirror to your own systems and operations and asking if they are fit for purpose. S4 has since hired Colin Day as chair of its audit and risk committee and promoted Chris Martin to chief operating officer – the first of several appointments that Sir Martin Sorrell has stated are the first steps to rebuilding confidence. As a youngster building my first company, I was once told ‘business is easy except for the clients and staff.’ This is pretty much spot on, but I would add a further challenge to the mix in the form of systems. Edwards Deming, a renowned American engineer and businessman from the 20th century, claimed “94% of problems in business are systems-driven, but only 6% are people-driven.“ I would argue that is possibly over the top for the people-centric, service-focused marketing sector, but it still highlights that people are often restricted by the systems and processes they are bound by. Within Green Square we are heading toward a hundred years of combined C-suite experience in the hot seat. We all have war stories regarding system implementations and how poor process has inhibited growth at certain stages. This experience is vital as we assist with businesses in considering their M&A options and aiming to attain maximum value. Most businesses work hard to preserve a swan-like appearance, where serenity on the surface is upheld by frantic activity below the water. Things were even more stretched at S4, as the auditors discovered when assessing their finance operations. Consequently, the failure of systems and processes to evidence a robust audit trail and reporting resulted in the late filing of accounts. Many marketing and creative agencies focus all their attention on being brilliant at what they do while ignoring the back-office platform. This can be foolhardy as the former can only scale and blossom based on the latter being robust. Systems and the ability to scale become critical in businesses approaching 50 staff and above. This is when small business finance and resource management tools become inadequate. In The Drum’s recent Independent Agency Census 2022, there are six financial factors on which they assess performance: turnover, turnover growth, turnover percentage growth, turnover per head, gross profit and gross profit growth. These factors are clearly fundamental to the underlying health of any business, but on their own don’t necessarily allow for a view of how sustainable and scalable a company’s operations are. This is often linked to sales processes, account management, service delivery, client experience, commercial practice and staff churn. These factors and many others are all inherently linked to systems and processes being strong and unified from the front to the back of house. As agencies get momentum and start to scale, they often fall into the trap of seeing the solution to every problem as more people. In the words of Michael Gerber, the American Author who is evangelical about processes in businesses, “systems run the business and people run the systems” – so throwing more bodies at a problem as opposed to investing in the underlying systems is rarely the right approach. Entrepreneurs often by their very nature hate the detail and complexity required for building operational systems. They get frustrated and see it as a waste of time and money. But effective process not only reduces reliance on people and removes single points of failure, but it also relieves stress levels and increases the time available for creativity and innovation. From an M&A perspective, strong systems mean the knowledge and ability to ‘get things done’ are not tied up within a few people. This is a huge value driver in the eyes of an acquirer. People are essential, but when blended with quality operations, you achieve a secret sauce that is attractive to buyers and can often differentiate you from the competition. As an example, it is reasonable to expect a business to have access to key management data that ultimately helps to drive decisions and profitability. This includes being able to assess the profit margin of individual clients, projects and service lines. But it is surprising how few businesses have this readily to hand. When analyzing this for due diligence, it often becomes apparent that there are significant imbalances and certain commercial relationships or services that add limited value. Other processes around recruitment, onboarding staff and ongoing management of HR matters should also be systemized in a way that supports your culture positively and makes you stand out from the competition, attracting and keeping the best talent available. There is strong evidence to prove that haphazard approaches to hiring and inducting staff, along with ongoing employee engagement, will reduce the longevity of tenure and increase staff churn. A buyer won’t expect you to have the same systems or approach as they do, but if they see a culture that is underpinned with robust process and data to support effective decision-making, they will view you as a mature outfit with a growth-focused management ethos. On the other hand, when there is a fundamental process issue as with S4, it can take a long time to fix and rebuild reputation. Sorrell has not only admitted the slump in S4’s share price will affect acquisition activity, but also conceded “that clients and potential clients might be less inclined to work with the company in the future, given the chaos,“ according to The Times. Further to this admission and following the new appointments, Sorrell said: “In a way we’re starting again, not from where we were at the beginning, which was zero, but we’re starting again to build that trust and confidence having gone through an unacceptable event.” This proves that internal systems can be as important for success as being on the bleeding edge of a new trend or having a great sales strategy, so investing time and money in systems can yield great returns in the long run, as well as being a powerful lever to pull on when considering M&A. Investment in operations needs to be driven from the top, and those that don’t will suffer in the long run. In the words of the American author Orison Swett Marden, “a good system shortens the road to the goal.“ Read more  

Mergers and acquisitions can be messy affairs. And if you’ve been following the saga of M&C Saatchi you’ll have noticed almost daily alerts on the two suitors chasing it for acquisition. The creative agency, which seems not entirely keen on the possibility of a sale, currently has bids from two companies—with no conclusion in sight after eight months of dealings. M&C Saatchi was founded in 1995 by brothers Maurice and Charles Saatchi, Jeremy Sinclair, Bill Muirhead and David Kershaw—following an acrimonious split with Publicis-owned Saatchi & Saatchi. It currently has a client list that includes Adidas, PepsiCo, Disney, Heineken, the Commonwealth Bank and Uber—not to mention a lucrative contract with the British government. A hostile reception Since January, the agency has been the subject of a hostile takeover attempt by AdvancedAdvT Limited (AdvT), which is led by Vindoka ‘Vin’ Murria. At the time, Murria was M&C’s deputy chair. AdvT argued the acquisition would be “an opportunity to build a data, analytics and digitally focused creative marketing business with a strong balance sheet and additional management expertise.” In June, M&C directors felt it was “not appropriate” for Murria to be re-elected to the board. She was removed from her position as a result. Murria and AdvT together own 22.3% of M&C Saatchi, valued at around $307 million (253.6 million pounds). But that number was eclipsed when another competitor entered the fray: Next 15 Communications. Fresh off the merger with Engine Group, Next 15 set its sights on M&C Saatchi. An offer of $375 million (310 million pounds) was agreed upon as the preferred offer by the board. But Murria continued her fight: “Our final offer has greater potential to deliver shareholders and employees faster growth and significant value creation,” she said, adding that Next 15 was “a credible buyer of M&C Saatchi.” In its investor presentation, Next 15 said it would create an “opportunity to build a global growth consulting group that can offer a compelling alternative to the big four consulting and marketing services groups. A group that leverages top-flight creativity, technology, data, business consulting and digital marketing to deliver meaningful change.” A slide from suitor Next 15’s investor presentationNext 15 Next 15 said it would offer complementary client bases, an “enhanced” public sector offering and clearer focus on data and analytics. It would also invest across EMEA and APAC, as well as strengthen eCommerce, paid media, demand/lead generation and strategic consulting services. Unlike AdvT, which during the last AGM voted against the reappointment of Gareth Davis and non-executive Lisa Gordon as directors, Next 15 has placed “great importance” on retaining existing management and employees—and revealed that it had already held some initial “high level” planning and post-merger discussions. The future business would be led by a team featuring key people from both Next 15 and M&C Saatchi, the investor proposal revealed. Stalling the outcome But in June, another wrench was thrown into the deal. M&C Saatchi directors argued the deal shouldn’t go forward. “The M&C Saatchi Directors, who have been so advised by Numis and Liberum as to the financial terms of the Next 15 Offer, no longer consider the terms of the Next 15 Offer to be fair and reasonable solely on the basis of the deterioration in value of Next 15 Shares since the Announcement Date.” “We reached agreement with the board and executive team of M&C Saatchi after extensive negotiation and believe our offer is full and fair,” said Next 15 CEO Tim Dyson. “We do not believe that the recent market volatility undermines the fundamental proposition of this transaction.” “We are focused on our very successful strategy of delivering meaningful change for our clients—and accelerating our journey of simplification, digitization and connection.” Moray MacLennan, chief executive officer for M&C Saatchi The two parties were then set to meet August 19 to vote on the bid. But following M&C’s strong half-year results and the tumble in Next 15 shares, another disparity emerged. M&C Saatchi reported a 10% growth in revenue year-on-year with an anticipated pre-tax profit of around $37.5 million (31 million pounds) by the end of 2022. The better-than-expected results are anticipated to continue through 2022, with heightened demand for M&C’s specialist services in the U.K., Americas and Asia. “We are focused on our very successful strategy of delivering meaningful change for our clients and accelerating our journey of simplification, digitization and connection,” Moray MacLennan, chief executive officer for M&C Saatchi, told Adweek. “Our recent client wins, including PepsiCo, Barclays, and Samsung, reflect the strength of our approach. We remain confident that we will continue on this trajectory.” So that leaves three potential outcomes: AdvT wins. Next 15 wins. Or M&C Saatchi remains independent. “I suspect Murria wanted to get it cheap, shift out the old guard and bring new people in, reorganize, make some acquisitions and then flip it on or potentially list it again,” explained Barry Dudley, a partner at media and marketing consultancy Green Square. “Meanwhile, Next 15 sees it as a business that is performing very well, that perhaps needs a little help to take it forward—but wants to largely keep it going with the plans existing management have in place.” So, more time is added to the clock. Read more

With high wage costs and competition for talent hitting agency revenues, a new study from the World Federation of Advertisers (WFA) suggests the sector is facing its “worst-ever crisis” in recruitment. In a survey by the WFA and media advisory MediaSense, 85% of agencies reported that they faced a ”high” scarcity of talent while 54% of agencies agreed that the sector was undergoing its ”worst” hiring crisis ever. The findings come after last week’s profit warning from S4 Capital, which company spokespeople blamed in part on rising staff costs. The WFA study – Media’s Got Talent? – surveyed 400 executives across media, adtech, agencies and brands, with its director of global media services Matt Green telling The Drum that the findings showed how agencies are particularly badly affected by competition for recruits. ”The talent crisis is affecting all parts of the industry and clients are feeling the pinch within their internal global media teams,” he says. ”But, as this research shows, the impact is particularly pronounced on the agency side and this is having a profound impact on the ability of clients to execute campaigns globally. ”While the industry couldn’t have predicted a global pandemic, this study also identifies intractable, but more predictable, issues that have had a dramatic impact, including training, talent management and even a perceived lack of purpose. These factors need to be addressed for the health of all our businesses and in the interest of a stronger client-agency dynamic.” Why are agency businesses in a talent crisis? The survey found that respondents blamed poor training (76%), talent management (68%), poor client behavior (61%) and competition from tech firms (58%) as the primary factors behind the crisis. Others pointed to the industry’s notoriously poor work-life balance for staff (76%), a lack of flexibility for staff (73%) and opaque career paths (72%) as barriers to swifter recruitment. 67% of all respondents reported that a lack of staff and the higher cost of hiring talent that is available were major barriers to business growth. “We know the impact this has on future growth, so it is vital that businesses start to invest in talent in a more meaningful way, ensuring they strike a better balance between specialists and all-rounders, youth and experience, expertise and attitude,“ says Gerry D’Angelo, vice-president of global media at Procter & Gamble. How does this limit business growth? The impact of the rising cost of staff (and the outright lack of staff) was most evident in last week’s profit warning from S4 Capital. The parent company of digital agency Media.Monks told investors that its wage bill had risen high enough that it needed to reassess its operating margins. In response, it has put in place a hiring freeze and lowered its profit expectations by almost $50m. According to Forrester’s global agency analyst, Jay Pattisall, agency networks and holding companies (S4 included) have been particularly exposed to fluctuations in the North American labor market. ”Digital networks, holding companies and consultancies range between 50% and 75% of their revenues from North America,” he explains. ”That does make them susceptible to the North American labor market.” Competition for skilled recruits in digital roles has been especially fierce, he notes, but those roles are key to businesses growing their digital transformation or digital media offerings. ”As agencies are competing, they’re competing for digital talent. That falls in the wheelhouse of Media.Monks and its core set of competencies.” That side of the business, he says, ”is having the most acute time attracting talent”. S4 may be more exposed to rising staff costs because the company had grown through multiple acquisitions, he says. Agencies that had recruited new staff directly, rather than absorbing teams from businesses they had acquired, would typically be able to exercise closer control over wage bills. Interpublic Group and Publicis Groupe both reported that they had hired thousands of new recruits last year, but each increased their labor costs by less than 2%. Pattisall says: ”When they grow, they’re buying or acquiring growth. But they’re also acquiring the necessity to maintain a labor force.” Barry Dudley, a partner at consultancy GreenSquare, tells The Drum that failing to keep a lid on staff costs would damage investor confidence in S4. ”It is suffering from a set of external factors that are hitting pretty much all businesses at the moment. But it has added a few self-inflicted wounds on top of that with its internal accounting and financial controls not keeping pace with its rapid growth. Perhaps this was again part of the reason for the latest share price drop – it’s one thing to see revenues shift up and down in forecasts, but your staff costs are not unknowns even if it is seeing upward pressure right now.” This could, in turn, force its leadership to rethink S4’s aggressive acquisition strategy, says Dudley. ”To date, it has ‘merged’ with businesses by paying 50% of the price for a business in cash and 50% in S4’s equity. The equity portion has just got a lot more expensive for S4 with a share price at £1.30 as I write, versus the £8.78 at its peak last October.” Read more

S4 Capital has been forced to push back the release of its full-year 2021 results for the second time this month, leading its share price to plunge 35%. Here’s what industry analysts have to say. S4 Capital, the advertising business owned by Sir Martin Sorrell, lost over a third of its market value after the company postponed its 2021 full-year financial results. On March 31, the company issued a statement explaining that auditors were not able to sign-off on the results, mere hours before they were slated to be made public. According to the statement, PricewaterhouseCoopers auditors alerted S4 leadership around midday GMT that they were “unable to complete the work necessary” to publish the earnings information. “As a result,” said S4 in its statement, “the company will release its preliminary results for 2021 as soon as PwC has completed its work.” The notice clarified that S4 still expects the year’s results to be “within the range of market expectations” and that the firm witnessed strong performance in the first two months of 2022. Even with this caveat, shares plummeted in the aftermath of the announcement, falling a total of 35% by the time the stock market closed in London today, wiping almost £950m ($1.25bn) off S4’s value. It marked the second time this month that the company has delayed publishing its results. On March 1, company leadership said that auditors required an extension on its audit, citing delays caused by Covid19-related resource bottlenecks. However, it was noted by analysts that the reasons cited for this delay were not linked to staffing problems or Covid-19 disruption. What the analysts are saying: Historical patterns suggest that when earnings are delayed, behind-the-scenes drama may be underway. “S4 has been extremely aggressive in acquisitions over recent years, and it is more than likely that there’s a debate over some of the intangibles there,“ said Greg Paull, co-founder and principal at global marketing consultancy R3. “PwC typically wouldn’t hold something back like this unless there was a good reason for it.” Paull predicts that declining share prices will slow organic growth and require the company to focus on developing its existing business. “[S4 has] used the past three years to bring in some amazing assets – now is its moment to show greater synergies between them.” Like Paull, Barry Dudley, partner at finance advisory Green Square, said the recent spate of acquisition might have added to PwC’s workload. It has recently brought 4 Mile Analytics, content marketing agency Miyagi, creative agency Cashmere and digital transformation services Zemoga into the group. “I certainly wouldn’t want to be the PwC partner responsible for the S4 audit as they must have experienced sensations similar to being in a jet engine testing wind tunnel when they last caught up with Sir Martin,” said Dudley. ”We have seen resourcing challenges with accountants, lawyers and other advisors on deals in recent months – primarily due to Covid — which is what appears to be going on at PwC. But to be side-swiped at the last minute like this does understandably raise suspicions. As S4 has continued to be highly acquisitive, there will have been a lot for PwC to grapple with. S4 has said that it expected its 2021 results to ’remain within the range of market expectations’, so I sincerely hope it’s just another side-effect of Covid that is behind all of this.” Conor O’Shea, analyst at Kepler Cheuvreux, told Bloomberg: “While it would be too much to say that this has echoes of Wirecard, at first sight it may be similar to the accounting issues that besieged Atos in 2021.” IT firm Atos saw its share price slump last April after it was forced to delay its finance update. It said accountants had found problems with financial reporting, “leading to several accounting errors,” and it had brought in external firms to investigate if this had led to misreporting elsewhere. The delay to publishing its result was as a result of missed deadline to complete that investigation. When S4’s 2021 results will be made available remains unclear. Morgan Stanley analyst Omar Sheikh said the lack of a revised date suggests the problem is “non-trivial.” S4 has been listed on the London Stock Exchange since 2016 and saw its acme in the market in August of last year when it hit a market cap of about $6.5bn. S4 share prices have dropped since then as the company has focused on investing more heavily in technology and staffed up post-pandemic. Read More

The deal, set to be completed in the coming days, will see the break up of the creative agency network The U.K. sector of Engine Group is set to be sold to communications group Next15. The sale has been ongoing for several months since Sky News first reported that its owners, Lake Capital, had appointed bank Lazards to find a buyer for the U.K. business—with an asking price of around £100 million. While it was preferable that the whole business would be bought as one, Next15 will buy the British part with talks ongoing about the U.S side. The future of the APAC section is unclear if both are sold separately. Adweek has spoken to four sources—each with knowledge of the deal—and it is understood that the sale will be confirmed before the end of February. Engine works with some of the U.K.’s biggest consumer brands, including baking brand Warburtons. Others on its blue-chip client list include the Royal Navy, Red Bull, Money Supermarket, AstraZeneca and telecoms provider Sky. It has a structure across three pillars: creative, communications and transformation. An uncertain future Next 15 is an AIM-listed tech and data-driven network with operations across Europe, North America and Asia Pacific operating agencies such as Elvis, Odd, Velocity and Mighty Social. “This structure is important because while the three units work together, they also have their own distinctive propositions and skill sets,” Tony Walford, partner for merger and acquisition consultancy Green Square, wrote for Adweek in July 2021. “This means the group could easily be split into the separate disciplines if needed, making it more attractive to buyers not looking to buy a group but a set of skills or competencies.” He added, “It is the only U.K. indie of scale still left, which in itself makes it a tasty proposition for any buyer, especially in a landscape in which the old model of legacy holding groups is coming increasingly under question.” When approached for comment, Next 15 said it had a rule not to discuss acquisitions. A spokesperson for Engine Group also declined to comment. At the end of January, while announcing organic growth of 24% year on year for its third quarter, Tim Dyson, Next 15’s chief executive, said: “Our performance in Q4 was again strong, showing that there has been no change in demand for our wide range of growth-enhancing services as market challenges and disruption across industries continue. It is further validation of our model that growth was strong across all segments and geographies. We look forward to updating investors in greater detail when we announce our final results in April, including how we are accelerating investment in talent and product development to continue to innovate for clients and drive longer term growth.” Meanwhile, that same month, the chief executive of Engine Creative, Ete Davies, left the agency after five years. Updated: In response to this story, Next 15 released the following statement to shareholders admitting that talks with Engine U.K. were underway: “Next Fifteen Communications Group plc … the tech and data-driven growth consultancy, notes the recent press speculation in relation to the potential acquisition of Engine UK. “In line with its strategy, the company regularly assesses a number of potential acquisition opportunities at any given time. The company confirms that it is in discussions with Engine UK and its owners. “Shareholders are advised that there can be no certainty that any transaction will proceed to completion or as to how any transaction would be structured. “A further announcement will be made in due course, if appropriate.” Read more Tony’s article July 2021

As IPG’s Michael Roth steps down from the holding company, Barry Dudley examines what the departure means for the group, and the industry at large. It’s the end of an era – no, it really is. Michael Roth, 74, is retiring from what we used to call ’the ad business.’ Roth, who stepped down as chairman and chief executive of the Interpublic Group (IPG) at the start of this year, last week announced that he will retire from advertising on December 31 after serving one year as executive chairman of the holding company giant. “My time as chairman and chief executive officer of IPG has been a tremendous privilege,” he said in his departing statement. “I am most proud of the work we have done to help shine a light on equity and inclusion, as well as being a value and purpose-driven enterprise. Operationally, we have evolved to meet the needs of an industry that is not only creative, but also increasingly about digital and data. Philippe [Krakowsky, his successor as chief executive officer] has been key to the efforts to move the company forward on all these fronts, working with me and the board to build a contemporary organisation that delivers high-value services for marketers. Our clients, people and shareholders are in very good hands going forward.” Sir Martin Sorrell, Maurice Levy and Roth were a trio of players that dominated the global marcomms industry for almost three decades. They were different from the ad titans of the post-war era, the David Ogilvys and Bill Bernbachs – they weren’t creative types, they were unashamed money men. Along with John Wren of Omnicom, they built up big holding company empires, mostly through acquisition (sometimes aggressive too) and consolidation. Now, in an era dominated by a pandemic and ongoing digital disruption, the holding company model may seem hopelessly quaint and outdated, but at the turn of the century it seemed the best way to meet the demands of shareholders for profits; and of clients, whose marketing needs were becoming increasingly global. Big was beautiful, and as it turned out, pretty profitable too. Many in the creative community weren’t happy with Roth (as they weren’t with Sorrell or Wren or Levy), but shareholders and clients were. Business was good. Roth wasn’t an ad industry guy – he was a certified public accountant who was an alumnus of New York University Law School and Boston University Law School. Before joining IPG, he was chairman and chief executive of Mony, a financial services holding company. Under Roth’s leadership, Mony diversified its business mix, broadened its distribution channels and enhanced its ability to compete in a changing financial services marketplace ​– a lot of parallels to what was required of him when he took over the leadership of IPG from David Bell back in 2005. He led the agency network, which owns the likes of McCann (the venerable McCann-Erickson was the foundation on which the IPG empire was built), FCB, Golin, RGA, MullenLowe, Weber Shandwick and many others, and created one of the so-called ‘Big Four‘ holding groups (along with Omnicom, WPP and Publicis). Over the years of Roth’s tenure, IPG was subject to many a rumor, and much criticism. Many observers thought it was the runt of the ‘Big Four‘ litter, and thus ripe for a takeover by one of its rivals; while others – including some activist shareholders – thought its parts were worth more than the sum, believing it should be broken up and sold off to realise its true value. But through it all, Roth stuck to his principles – for 15 years all told. He leaves it in arguably far better shape than he found it. It’s a measure of the man’s achievement that the tributes paid to him over the past few days have been so fulsome and affectionate. Rivals as well as those he worked with and managed have been among the cheerleaders. Long-time adversary Sir Martin, now chair of S4 Capital, said: “Michael clearly did an outstanding job in leading IPG out of a difficult position at the beginning of the new millennium and setting it in a new direction. He increased its growth rate, both top and bottom line, and now it has almost caught up with the Big Three in terms of market capitalisation. The boy done well.” Indeed. Another part of his legacy was an eye for a good buy – and for taking the long-term view. A great example of this came in 2018 when IPG bought the database marketing and consumer insight business Acxiom for $2.3bn, its biggest-ever acquisition. The deal raised a few eyebrows, despite the interest in data at the time; the price paid came in for particular criticism. But three years on it was put into a favorable perspective by Publicis’s acquisition of Epsilon for $4bn. Initially IPG focused on using Acxiom’s data capabilities across its media agencies, and it took a while to figure out how best to use Acxiom across the group’s agency offerings. But Roth and his team managed to integrate their new purchase into the group, and it has contributed to profits ever since – and significantly, helped win new clients (as R/GA did years earlier when IPG bought Bob Greenberg’s innovative New York digital agency). “Acxiom people and capabilities have played an important part in some significant new business wins,” Krakowsky said in 2019. “When it comes to data privacy, and the ways in which companies need to approach data in an age of increased scrutiny and regulation, we can also now bring [an] expertise and credibility that would have been more challenging without a company with Acxiom’s pedigree.” So commercially there are a lot of ticks, but isn’t that what you’d expect of an accountant/lawyer? Definitely. What you probably wouldn’t have expected were the tributes to the value he placed on his people. Mark Read, WPP chief executive, commented: “Michael has always been a champion of talent as the bedrock of great agency brands. He has also been a leader in pushing for greater diversity in our industry, to the benefit of all.” This rings so true with what we have witnessed with our clients and from many conversations over the last six months – if a business has strong leadership, is capable of navigating change and has always nurtured a deep culture across all of its people, it will have come out of the pandemic lows on the front foot. And diversity has clearly been an agenda item for Roth for some time – although there’s still plenty to be done on this front, it’s not a catching up housekeeping exercise. All in all, I’d say that’s some legacy. Read more