Martin Sorrell Puts 2022 in the Rearview and Looks Toward 'Faster, Better, More Efficient' 2023

Industry veteran sees agency consolidation, spin-offs on horizon

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Sir Martin Sorrell brought along about 40 of his Monks to Las Vegas last week. 

The founder and executive chairman of S4 Capital, the parent company of integrated agency Media.Monks, says a return to CES allowed for valuable face time with clients and partners. 

50% of revenue is driven by tech clients including Meta, Logitech, Amazon and Epic Games. “They know we have a different model and they find that inherently attractive,” he said.

Sorrell and Media.Monks co-founder Wesley ter Haar sat down with Adweek Saturday as the four-day tech conference drew to a close. Despite global economic headwinds, Sorrell is bullish on his business.

“I feel pretty good about the prospects for ‘23, given where we’re positioned and what we do,” he said. “Economically, things are going to be difficult for ‘23 and ‘24. And you have to wait for the American election in ‘24.”

That model’s a busted flush. It doesn’t work.

—Martin Sorrell, founder and executive chairman, S4 Capital

Sorrell thinks a soft economy could help nimble, digital agencies like Media.Monks.

“The digital economy continues to grow. According to our calculations, this year the platforms are going to grow by 8%. Last year, they grew by 10% on average. So it’s not a bad environment for us,” he said.

Content makes up 60% of its business, data makes up 30% and tech services sits at 10%. Sorrell would like to see that balance shift with tech services taking a bigger piece of the pie, to 20%. “That takes us up against Accenture, Epam and Globant,” he said, other businesses in the tech services space.

A rocky 2022

Sorrell formed S4 in May 2018 and quickly began acquiring and merging creative, data and services agencies together into what is now a 9,000-person team. Publicly traded S4 Capital trades around $2.30 a share down from an all-time high of $12.25 in September 2021.

That rapid succession of mergers from 2019 to 2021 allowed for double-digit growth each year, culminating in a projected 25% growth rate for 2022. But that trajectory also led to accounting issues which came to a head early last year when auditor PWC twice refused to sign off on the company’s books.

“We had our issues in the first half of last year,” Sorrell said of the situation, which he previously called “embarrassing.”

And while the bottom line was growing 25%, headcount was up 40%. “Our business is not rocket science … if one grows faster than the other, it’s a problem.” Hiring was paused. Still, Sorrell expects headcount to pick up, with staff levels hitting 9,500 at the end of 2023.

Not a holding company

Best known for building WPP into the world’s largest creative communications company, Sorrell, who calls his network a “unitary structure,” believes the best days of the holding companies are in the past.

“That model’s a busted flush. It doesn’t work,” he said. “I look at WPP today in terms of its performance. It’s not the largest anymore. It’s now number four in terms of market cap.”

“Networks are built for a different age,” added ter Haar. “There is an internal incentive to modernize our ways of working.”

‘There will be consolidation in the business’

Sorrell says 2023 may also be the year of consolidation. 

“I spoke to an investment banker here, and I said, ‘Well, what do you think about the holding companies?’ And he said, ‘I think there’ll be more consolidation because that’s the way out of their market value problem.’”

Asked for M&A predictions, Sorrell said: “I don’t think Dentsu should run an international business … the international part of Dentsu should go into some other holding company.”

2023 also marks 10 years since the failed merger of holding companies Omnicom and Publicis.

“From a shareholder point of view, that probably was the right thing to do. The social issues blew it up,” he said, adding that now may be the right time for spinoffs. 

While it was built through mergers, ter Haar says Media.Monks now has “the full train set.” 

“We’re not necessarily doing acquisitions just to find money. So we’re very happy with the current skill set and talent.”

Agencies to emulate

Agency veterans both, Sorrell and ter Haar eagerly talk about who they admire in the creative, data and services sector.

“Wieden is a class of one,” ter Haar said, adding, “I almost think it sort of tricks the industry that that’s a replicable model, because it’s so unique. And it works so well.”

“Then there are specialists like Oliver or Jellyfish and tech services companies like Globant and Epam,” Sorrell added.

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