Could the Departure of WPP’s CEO Cause a Breakup of the Advertisement Empire?

Author: Victor Sambuis

  • Martin Sorrell, the founder of WPP plc (NYSE:WPP), abruptly left the company last Saturday due to allegations of personal misconduct and misuse of company assets, before taking the time to groom a successor
  • Potential split of the network of advertisement agencies, as Sorrell held the empire together
  • Interim management is searching for a new CEO to bring unity and growth to the company

Martin Sorrell is the man solely responsible for the union of 400 individual advertisement agencies into WPP, the largest advertising empire ever seen, creating marketing campaigns for firms like Coca Cola Co. and Procter & Gamble Co. With his sudden departure without a viable successor, the future of WPP is left uncertain. This uncertainty has currently translated into a 6% drop in share prices.

The most likely next step for the company is to sell off its underperforming units, such as the data management unit Kantar. The sale of Kantar has the potential of raising $5 billion for WPP.

While it searches for a new CEO, WPP’s board has temporarily appointed two interim operating chiefs and an executive chairman to keep the business going.  The new CEO, once hired, will be faced with renewing WPP’s strategy as the company battles increasing competition from other advertising giants such Publicis Groupe SA and Omnicon Group Inc as well as reinforcing the unity between assets across the holding company.

Although there is mystery around Sorrell’s departure, the most likely cause are allegations of personal misconduct and misuse of company assets. Indeed, WPP’s shares lost a third of their value over the past year, a sign that Sorrell may have been losing his touch.

 

Takeaway:

When the misconduct and misuse of company assets allegations are taken into account, along with the huge decrease in WPP’s share price over the past year, Martin Sorrell’s departure isn’t that surprising. However, it was horribly timed, as the firm has recently found itself on a declining slope compared to its rivals and is in desperate need of a leader to reunify the different agencies that make up WPP, as well as stir the company in a new direction. If a new CEO isn’t found soon, the potential fragmentation of WPP becomes a likely outcome. However, the sheer size of WPP and the multitude of clients it serves means that the fragmentation would have ripple effects throughout the economy.