Martin Sorrell airs his grievances with holding companies (again)

The problem with holding companies is their inability to change, said S4 Capital Chairman Martin Sorrell, and the former longtime chief executive of WPP Group. He spoke on a panel moderated by Ad Age Editor Brian Braiker at the DPAA Video Everywhere Summit in New York today.

Sorrell described the state of holding companies, which he said are too focused on the declining traditional media sector, as “catastrophic.” 

“You look at the industry and in the first six months of this year, the industry was up 6.3 percent, digital up 20 percent and traditional down 3.3 percent,” he said.

Sorrell claimed that he is not aiming to build another holding company with S4 (even as the company continues to grow through acquisitions, most recently merging MediaMonks with Silicon Valley digital shop Firewood). He called holding groups “uncontrolled” in that they do not have one integrated business.

“Focus is important,” Sorrell said. “The Googles, Facebooks and Amazons have an advantage because they are owned and controlled by one man. Jeff Bezos can move [Amazon] because he controls it." But holding companies, said Sorrell, have to "report every quarter and [they’re] under the microscope.”

He praised WPP's proposed sale of Kantar to private equity firm Bain Capital, which shareholders are set to meet to either approve or deny this week. Bain agreed to buy 60 percent of the data, research and consulting company from WPP, which will maintain ownership of the remaining 40 percent, in July. Sorrell, who claimed Kantar shed 100 million pounds ($128 million) in net income in 2018, suggested the privatization of Kantar could boost its profitability.

“The only way to digitally transform these businesses is out of the public searchlight,” Sorrell said. He's argued before that the holding companies should be broken up.

Sorrell said S4’s strategy in being purely digital may be right or it may be wrong, but at least he’s trying “to build a different model.”

Among other topics Sorrell covered on Tuesday’s panel: He reiterated that he does not believe the tech giants like Google and Facebook are “frenemies” of agencies anymore, and said that investors should short the stocks of the winners of the Disney media review (announced this week as Omnicom and Publicis). Sorrell also argued that Accenture Interactive should have bought WPP’s GroupM rather than Droga5.

“Instead of paying half a billion for Droga5, [Accenture] would have been better off paying $15 billion with a market cap of $115 billion for GroupM,” he said.

Whether S4 Capital continues growing or not, Sorrell said retirement is not part of his plan. “I don’t want to play golf,” he said on the panel. “I’d get frustrated if I felt like I couldn’t make some sort of impact, big or small.”