Sorrell attempts to revive struggling ad firm with merger talks

Telegraph

2 days ago

Sir Martin Sorrell is vying to revive his struggling advertising agency by exploring a potential takeover of a rival group.
S4 Capital, which was founded by Sir Martin in 2018, confirmed it has received an approach from MSQ Partners about a possible merger.
The company said any deal would be structured as an acquisition of MSQ Partners by S4 Capital, but warned discussions were at a 'very preliminary stage' and there was no certainty an agreement would be reached.
Shares in S4 Capital jumped as much as 10pc on announcement of the talks. MSQ Partners, which is majority-owned by US private equity firm One Equity Partners, was contacted for comment.
The discussions will raise questions over the future of Sir Martin, who founded S4 Capital following his acrimonious departure from WPP. He grew the company rapidly in its first few years through a slew of acquisitions.
But the ad firm, which counts Amazon and Google among its clients, has been hit by a slowdown in advertising spend and accounting blunders that forced it to delay its financial results twice.
S4 has also issued a string of profit warnings in recent years after falling short on optimistic revenue forecasts. Shares have collapsed more than 90pc in the last five years with the company's market value now below £140m, down from a peak of around £5bn in 2021.
The ad firm has rolled out heavy cost-cutting measures, slashing hundreds of roles and cutting discretionary spending, but still posted a loss of £307m last year after taking a £280m write-down owing to tough trading conditions.
London-based MSQ Partners, which was founded in 2011, employs more than 1,850 people worldwide and counts Diageo, Unilever and Vodafone among its clients.
It is not the first time S4 Partners has been linked to a potential merger. The ad firm last year received a takeover offer from US marketing group Stagwell but Sir Martin rebuffed the offer, the Wall Street Journal reported at the time.
It comes amid an accelerating trend of consolidation across the advertising industry as traditional agencies grapple with the dominance of tech giants and the rapid growth of artificial intelligence (AI).
Omnicom and Interpublic are gearing up for a merger that will create the world's largest advertising company, worth $30bn (£22bn). WPP, which was overtaken by French rival Publicis last year, has also been linked to a potential tie-up with Accenture.
WPP, which has appointed former Microsoft executive Cindy Rose to replace Mark Read as its chief executive from next month, has itself wielded the axe on 7,000 jobs over the last year in an effort to slim down its business and cut costs.