Shares in ad giant WPP fall amid breakup speculation

Anna Jefferson
April 18, 2018

The advertising agency WPP surprised the market last week after announcing that had appointed two lawyers to investigate allegedly unlawful behavior by Martin Sorrell.

Sorrell said in a statement late on Saturday that he would be stepping down from the global marketing giant, following an investigation into alleged misconduct.

Sorrell is said to have refuted the accusations levelled against him in a farewell letter to staff but has resigned from his role nonetheless, claiming that the "current disruption" was negatively affecting the business.

Sorrell's shoes are being filled by WPP Digital chief executive Mark Read and Andrew Scott, chief operating officer for Europe, on an interim basis as joint chief operating officers, but the multinational company could cast its net wider for a permanent successor.

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In March WPP reported its weakest annual results since the financial crisis, with Sir Martin describing 2017 as "not a pretty year" for the company even though pre-tax profits were just over £2bn.

Irrespective of current events - Sorrell denies any wrongdoing - the question of who should succeed such an indomitable figure, and the company's readiness for that eventuality, had already been among the thorniest subjects facing WPP in recent years.

"Sorrell, formerly the finance director at Saatchi & Saatchi, created WPP in the mid-'80s". The WPP will examine internal and external candidates for the post, and the process may take several months. The withdrawal of the agency's CEO, who turned a company with two employees into one of the largest companies in the United Kingdom with 200,000 employees in 112 countries, leaves WPP at a key moment for the industry and at a time when the company is undergoing a major tension. The industry as a whole was facing new challenges from consultants such as Accenture and Deloitte, and of course the likes of Amazon, Google and Facebook.

Quarta's executive role is likely to anger investors because he is also chairman of hip replacement group Smith & Nephew and some shareholders are anxious he will not have enough time to fulfil his duties there as well as a bigger role at WPP.

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Paul Bainsfair, director general of the Institute of Practisioners in Advertising, added: "There's no doubt about it, Sir Martin was a game changer". The general public has only been told that the investigation was conducted of which the conclusion and findings have not been shared.

Sorrell, who worked at Saatchi & Saatchi before founding WPP, said the company has been "a passion, focus and source of energy for so long".

Some analysts believe WPP, which comprises about 400 separate businesses, including Ogilvy & Mather, Kantar Group, Hogarth Worldwide and Young & Rubicam, could be broken up.

In a statement to the press, regarding his departure, Sorrell said: "Obviously I am sad to leave WPP after 33 years". I leave the Company in very good hands, as the Board knows.

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