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SMEXIT - a Clean Slate for Kantar

April 16 2018

It's been a running gag in the DRNO office for years: 'Is that everything for today?' 'Yes, unless Martin Sorrell quits between now and 6 o'clock'. Now, rather unexpectedly, it's happened - but what does Sir Martin's departure mean for WPP and for its 'DIM' division, Kantar?

Sir Martin SorrellWPP announced on Saturday night that Sorrell had 'stepped down' as CEO with immediate effect. Roberto Quarta, Chairman of WPP, will serve as Executive Chairman until the appointment of a new Chief Exec; while Mark Read, CEO of Wunderman and WPP Digital, and Andrew Scott, WPP Corporate Development Director and COO Europe, have been appointed as joint COOs of WPP. Sir Martin 'will be available to assist with the transition' - the Group has talked for a couple of years about succession planning, but may not have reached a conclusion as yet.

'Good Leaver'

The immediate circumstances of the announcement are not what Sorrell would have imagined or wanted. Less than a fortnight ago, it was announced that the Board had hired an independent lawyer to investigate media claims of 'personal misconduct' against Sir Martin, who said in a statement that he rejected the allegations 'unreservedly'. Saturday's WPP statement said this investigation 'has concluded' and reiterated the Group's earlier statement that the allegation 'did not involve amounts that are material'. Sir Martin will be treated as having retired on leaving WPP, as detailed in the Directors' Compensation Policy, and dependent on performance over the next five years, will get share awards totalling up to £20m - all indicating that he is not officially leaving under a cloud (a 'good leaver' as it's known in the trade). Many will feel that it would be bizarre for anyone in receipt of £70m in one recent year to have claimed a few questionable quid for fares, and therefore that without a motive there can't be very much in it, but must now wonder why the resignation has followed so quickly after the investigation and why it couldn't be made public. However, WPP says categorically in response to a BBC question over the matter this evening that it won't be. We'll just have to wonder.

The Legacy

This leaves the world to look, as perhaps it should, at the legacy of the man and his extraordinary achievement in building a 2-person shopping basket manufacturer into the world's biggest agency network, with more than 200,000 staff and associates (including investments) in around 400 separate businesses across the world spanning media, public relations, creative agencies and of course insights. Sir Martin and his family own approximately two percent of the company, worth around £300m.

Sorrell himself said in his weekend statement: 'Obviously I am sad to leave WPP after 33 years. It has been a passion, focus and source of energy for so long. However, I believe it is in the best interests of the business if I step down now... I will particularly miss the daily interactions with everyone across the world and want to thank them and their families for all they have done, and will do, for WPP'.

By the way, according to the Financial Times, Sorrell has never had a non-competition agreement, so while he's leaving, he may not be retiring. We're sure (not) that you'll read it here on DRNO first.

But where does the resignation leave the Group?

On the plus side, WPP's gender pay gap must have halved overnight. The down side may be greater - to many, Sorrell is or was WPP, and with his departure it will lose both a guiding hand and - some argue, a raison d'être. Until recently it has remained a relatively loose coalition of businesses in different sectors, maintaining their own branding and leaders, and recent attempts to encourage cross-agency collaboration and communication, as well as rationalising a few units, have only begun to address this.

The announcement is certainly the end of an era, and the more gung-ho pundits are already suggesting not only that WPP will be broken up, but that all the other big marketing services conglomerates will follow suit.

Leaving this fairly drastic speculation aside for a moment, and looking at recent headlines on DRNO, it's clear that the group has had its share of bad news. In addition to the investigation, the last ten headlines include shareholder grumblings, a slashed earnings forecast, a 'tough' Q3, criticisms of a late payment policy and finally Sorrell's admission that 2017 had not been 'pretty'. Yet it's hard to escape the feeling that had it not been for the one real sin - a set of disappointing financials - all the rest might have been just a minor detail, and Sir Martin still in place. Over decades, the man who was once the financial mastermind of the rise of Saatchi and Saatchi has succeeded in growing WPP relentlessly, largely by acquisition, and it can't be a complete coincidence that he has left shortly after it finally posted a flat year. If so, it might be seen as a little harsh, or premature, given that other marcoms groups are also struggling mightily, and that WPP remains very profitable - headline EBITDA in the interim report for 2017 was £2.534 billion, up 4.7% or 1.2% in constant currency.

Kantar Prospects

Just over a sixth of WPP's revenue comes from its 'Data Investment Management' (DIM) division, Kantar - down from just under a quarter in 2013. Already, analysts are suggesting it may be the first thing to be sold off if WPP is split up or slimmed down, with a price tag of £3bn - £3.5bn touted - but whether or not this happens the situation offers positives for the former Insight wing, which has not seemed well-served by the existing setup. DIM has consistently lagged the rest of the group when it's grown (2017, 2016, 2015, 2014, 2013, 2012, 2011... we'll stop there) and has sometimes not grown at all while advertising and PR sister companies have done well. For all Sorrell's insistence that strength in insight and data was one of the things that set his conglomerate apart from competitors, Kantar as a whole hasn't flourished, and some if not all competitors have fared significantly better. Within Kantar, individual companies have shone, but as within WPP as a whole, the lack of synergy and cross-fertilisation is sometimes apparent, with resulting inefficiencies and bureaucracy.

Whatever happens with the departure of Sir Martin, there will be change, and industry-watchers will be hoping it's positive for Kantar. For starters, it may be an opportunity to ditch that awful acronym. In a sector full of Claritas's and Illuminas's, with Clear Ideas, Foresight and VisionCritical, Kantar - despite having a perfectly good name already - has been condemned to be DIM. We feel this was Sir Martin's preference and that someone should have told him to his face it had to go - now hopefully it can be dropped, along with the three woffly words it stands for - in favour of Insight & Analytics, perhaps. Something less acceptable to legal codification experts and taxonomists but more cheering for the rest of us.

More generally, we would love to see the division emerge from the shadows, and either flourish as a standalone, or steadily regrow its share of WPP's total business. Some analysts disagree strongly with the sell-off advocates and say there are plenty of reasons for keeping WPP together, most obviously the continuing weight of argument behind one of Sorrell's own favourite themes, the convergence of various media and marketing services. On balance it seems unlikely that it will be split up soon - but then we would have said on Friday it was unlikely the CEO and founder would leave any time this year. Whatever the case, Kantar leaders should be thinking positive - saluting the incredible career of Sir Martin, but 'embracing the opportunities of SMEXIT', to paraphrase the PM.

If it is to be sold off, a research group in the hands of passionate insight professionals, focused on its own sector and future, is no bad thing.

Whether you're a Kantar employee, manager or leader, industry commentator or any interested party, I'd love to hear your views on this, by email nickt@mrweb.com .

Nick Thomas

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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