Valuations of advertising companies are nearing levels that haven't been seen in a while, and that has implications for a potential breakup of ad giants, former WPP boss Martin Sorrell said Friday.
"The breakup values of these companies, or the market values, are approaching levels which we haven't seen for some time," Sorrell told CNBC's "Squawk Box Europe." "The pressure in the legacy sector is huge."
Sorrell highlighted Publicis Groupe's $4.4 billion acquisition of data marketing firm Epsilon earlier this year, which analysts had expressed skepticism about amid concerns over the French ad holding group's revenue growth and how the deal would align with its strategy.
Sorrell left WPP, the advertising empire he started in 1985, last year following a board-level investigation into the former CEO over alleged personal misconduct. He helped the company transition from a two-man operation to the world's largest advertising firm.
The industry is facing intense competitive pressure from the likes of Google and Facebook, which are dominating the digital advertising market and source a heavy portion of their revenues from online ads. But both companies face looming regulatory risks though, and calls are increasing for such tech giants to be broken up.
For WPP, which for decades had been on an acquisition spree, the focus since Sorrell's departure has been to sell off holdings in some units — most notably its 60% stake in market research group Kantar, which it sold for $4 billion to private equity giant Bain Capital.
Sorrell has since set up a new marketing venture called S4 Capital, which he created after acquiring a shell company listed on the London Stock Exchange. The group has already made a takeover deal, outbidding WPP to buy Dutch online ad agency Media Monks last year.
He added that WPP — which he still holds a stake in — has "outlived its purpose" and is having to make "legacy cuts" to remain relevant. S4 on the other hand, he said, has a "clean" balance sheet and has been growing its top line by 40% to 45%.