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Has arch predator Sorrell become the prey at S4 Capital?

The past few years have been a veritable raft of new experiences for Sir Martin Sorrell, latterly the gravity-defying rise in market value of his S4 Capital to £4.4bn and equally dramatic fall back to earth.

Now he finds himself in the unlikely position of becoming a takeover target as S4, it seems, has rejected a bid from Mark Penn’s Stagwell, valuing the company at around £555m, more than double its current market cap of £247m.

S4 has been hammered by a number of auditing issues and sharp cutbacks in spending by its raft of tech clients, essentially its raison d’être.

At its current valuation S4 is worth less than it paid for Dutch-based content company MediaMonks to kick things off in 2018. WPP was also interested in MediaMonks. Since then it has expanded around the world with a number of acquisitions including digital media agency MightyHive and also landed some big clients including BMW.

Stagwell’s bid, reported in the Wall Street Journal, is believed to have been made late last year and there’s no guarantee it’s still on the table. Some shareholders may have been tempted, had they been offered the chance.

£4.4bn was a ridiculous valuation (very nice for shareholders who sold, of course.) Is there an upside to S4, as Sorrell clearly believes?

Tech clients will return to the marketing lists but they’re more than capable of handling their communications internally, should they wish. AI will lead to cheaper ways of producing online content but not necessarily to the advantage of companies like S4 which, in its rapid scaling, became pretty people-heavy.

Sooner or later this year there’ll be some big deals in adland as the major players, including Sorrell’s former creation WPP, struggle for growth. The only surprise here is that it’s Sorrell, for once, on the receiving end.

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