MSQ and S4 Capital deal is off – for now anyway
Oh well, it was fun while it lasted (briefly.) Marketing group MSQ has firmly ruled out a merger with Sir Martin Sorrell’s S4 Capital, saying that such discussions may have taken place between representatives of its majority shareholder One Equity Partners (OEP) and S4 Capital, but its board was not involved.
It added that neither OEP nor MSQ (below) intends to pursue further discussions regarding the transaction. Which does rather suggest that OEP and MSQ haven’t exactly been on the same page.
In truth it was hard to see the logic behind such a deal, at least from MSQ’s point of view. S4 is much bigger, at least in terms of numbers, but struggling as its tech clients do their own thing with AI. MSQ, on the face of it although it’s hard to know with P/E-owned businesses, seems to be doing OK on its own although it’s currently embarked on expansion in the US, which has derailed many a UK-based marcoms business.
Sorrell also has the equivalent of a golden share in S4 which means, in essence, it can’t do anything major without his say-so and there are no signs he’s ready to leave the stage just yet. Which may be a relief to nervous MSQ employees.
As with many UK businesses the problem for both S4 and MSQ is scaling. You may grow by acquiring lots of smaller companies but, some time or other, there’s going to be one that doesn’t work and that can bring the whole edifice down. Quoted Next 15 may rue the day it bought what was left of Engine Group to become House337 just when the market for such agencies turned down (it also had a run at M&C Saatchi.)
Back in the day the brothers’ Saatchi & Saatchi bought Ted Bates in the US for a then eye-watering $450m (boss Bob Jacoby trousered $110m only to be fired later) beginning the rapid decline which led to its eventual sale to Publicis. S4 Capital was once valued at a dizzy £4.5 billion (it’s now £136m/$184m.) Sorrell is reported to have rebuffed a $700m approach from Mark Penn’s Stagwell last year.
It is, as they say, complicated. There’s surely another twist or two in the S4 Capital tale. MSQ may be better off charting its own course but, as some of the above details illustrate, it’s far from easy.
