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CNBC Interview with S4 Capital Chairman, Sir Martin Sorrell, from the World Economic Forum 2019


Following are excerpts from a CNBC interview with Sir Martin Sorrell, S4 Capital Chairman, and CNBC's Steve Sedgwick and Geoff Cutmore.

SS: Sir Martin Sorrell's new company, S4Capital, is on an acquisition spree, and looking for digital-only assets. The startup outbid Mr Sorrell's-, Sir Martin's, former company, WPP, to buy the Dutch agency, MediaMonks, and snapped up US outfit MightyHive in recent months, as part of a strategy to focus on content and programmatic commercial advertising, this after Sorrell left the empire he built up, a year ago, amid a wildly publicised scandal, so they say. Right, Sir Martin Sorrell, the Executive Chairman of S4Capital joins us now. Sir Martin, long time no speak, good to speak to you. Look, let's talk about M&A, and what you're trying to create. I read a quote from you, I'm-, I'm hoping this quote was you, because I'm going to go with it, 'The peanut has now morphed in to a coconut, and it is growing and ripening.' A) did you say that, and B) how big an empire are you trying to build?

MS: We did say that, it was-, and it was actually the progression from a peanut to a coconut, and a coco de mer was actually on the front page of our Prospectus, for the MightyHive acquisition, which you correctly described as a programmatic company, so we're very focused on the digital part of the-, the market, 200 billion out of a-, a trillion in-, in old and new, but-, but in the new stuff, about 500 billion. So, it's about-, it's running at about 20% of the total advertising and marketing services market, and we're focused on that, and we're focused on three things, Steve and Geoff. First is first-party data, second is digital content, and last, but not least, is programmatic media planning and buying. So, it's a-, a-, a-, really a focus on digital, the model is faster, better and cheaper, and in the sort of environment that they're talking about, here in Davos, and you were talking about, for the last few minutes, a-, a global market, which perhaps is slowing a little bit, maybe nominal growth of 3 to 4%, but slowing, and people are becoming a little bit concerned about the geopolitical risks, a faster, better, cheaper mar -- model is something that really appeals, I think, to CEOs, CMOs, CIOs and CTOs, and the unitary structure we have, instead of having a fragmented structure, based on earnouts, I think is critical, too. So, those three things, focus on digital, faster, better, cheaper, and that last, unitary structure, I think are pretty key in the environment that we're going in to, over the next couple of years.

GC: Sir Martin, can I just get this question out of the way, because I haven't seen you since you changed businesses, and there's been a lot of water under the bridge since then. As I understand it, you signed NDAs with the board, as you left your old business, to come to the new one. I don't know whether we're ever going to find out exactly what happened in those boardroom conversations, but maybe you could help us, at least, draw some conclusions from your departure, and your starting of a new business. What-, what view should old WPP shareholders have of the change that took place, and how should they feel about your new operation?

MS: Well, I remain a shareholder, I think I'm the largest individual shareholder, a top ten shareholder in WPP, Geoff, so I'm very concerned about the progress that WPP makes, too, and, of course, it's obviously not been a-, a-, an easy period, over the last six months, or so, in relation to major clients at-, at-, at WPP. But, having said that, we're-, we're-, we're very focused on that progress, and you know, from the company's own statement, that they investigated the-, the-, the background to it, found nothing material, and we moved on from then, and I decided to-, to go off and start something new. The history of my contractual agreements actually span 30, 33 years, and developed over the years, and the board was perfectly satisfied with those agreements, when they were put in place in 2008, or wherever they were finalised. So, we moved on from that, I've moved on to pastures new, which I described to you, a few seconds ago, and we're very focused on a-, on a smaller part of the market. And your reference to peanuts or coconuts, I mean, I-, I can't, for the life of me, believe that WPP is worried about little old S4Capital, which, you know, on a pro forma basis, last year, had revenues of about $150 million, EBITDA of $30 million, and a market cap of $600 million. I mean, it's-, in relation to a $20 billion revenue company, $3 billion of EBITDA, and $15 billion, $14 billion of market cap, I mean, it's-, it's-, we're really an irrelevance.

SS: Sir Martin, you're talked about a lot in the same breath as the mega CEOs, the big people that Davos man looks up to, these uber-executives, these demigods of the boardroom, as well. That's dead, isn't it? That's over, isn't it? Is Davos man finally getting it, that actually, having one, all-powerful, omnipotent man at the top of the company, and it always is a man, unfortunately, do you think that that's done and dusted, and actually, perhaps you've learnt lessons, as well, about how to go about your business, and how to build a business, rather than having this-, this all-powerful person at the top?

MS: Well, I think-, well, usually, you're not prone to generalisation, Steve, and that was a very, very broad generalisation. I mean, to suggest that 135,000 people in 113 countries, in the case of WPP, or, in the case of S4Capital, 1,200 people, in 12 countries, that they-, you know, they are irrelevant, in the-, the scheme of things, it's up to one man, or, indeed, one woman, is clearly nonsense. It depends on a-, a-, a fairly complex structure. You know, I think the more important point is that people start to talk about simplifying organisations, and it's what I call 'management by spreadsheet', you know, management sitting behind a desk, uh, in one geographical location in the world, and making bureaucratic decisions. I think that's dangerous. Companies are complex organisations, in the case of WPP, and indeed S4Capital, they're based on organisations around clients, around country, and around function, and they depend on large numbers of people for their success, and it's bringing those people together, in a unified way, that's absolutely critical. And in our industry, going back to what we're trying to do at S4Capital, as I said before, the third point, in addition to digital, in addition to faster, better, cheaper, we're focusing on a unitary structure. When we acquired MediaMonks, and-, and indeed MightyHive, and-, and indeed MightyHive, we effectively merged with them, they weren't acquisitions. What we asked the owners of the companies to do is not sell their businesses, but buy in to the concept of building a digital company, so they took half shares and half cash. So I think, really, what we're talking about is building teams, Steve, not-, not your reference, not your-, your sweeping generalisation.

SS: I'm going to give you the last word on this, for now, but will you do me a favour? Will you sit down with me, on camera, at a later date, and we'll shoot this out properly, as well? Because I think there's a-, there's a broader issue, that I think you and I would like to chat about. So, I'm going to take it that you will, and, sir Martin, always a pleasure speaking to you, glad that you're-, you're-, Geoff and I and you are resuming our old act-,

MS: Well, whatever-, whatever-, whatever the-, whatever the issue is, Geoff, we'll discuss it, and thanks for not giving me the death slot at 6:15. 7:15 is a much better slot.

SS: No, no, no. We wanted to give that to John Studzinski instead, for a change. Sir Martin, we'll speak to you soon. Hope to catch up with you later in the week here in Davos, Sir Martin Sorrell-,

MS: Well, lucky John. Thank you very much. Thank you.

SS: Executive Chairman of S4 Capital. Thank you very much indeed for that.

MS: Thank you. Thank you, thank you, thank you.