TIME: Almanac 1993/TIME Almanac 1993.iso/time/051589/05158900.018

Text File | 1992-09-25 | 3.7 KB | 70 lines

                                                                                BUSINESS, Page 58

Machiavelli on Madison Avenue



A British advertising juggernaut bids for Ogilvy & Mather

    Just four years ago, the WPP Group was a sleepy English
manufacturer of wire market baskets, filing trays and teapots.
But since then the company has become one of the world's most
powerful advertising firms. The WPP conglomerate has already
swallowed up the New York City-based JWT Group, which included
two leading U.S. agencies, J. Walter Thompson and Lord, Geller,
Federico, Einstein. The architect of WPP's remarkable
transformation is Martin Sorrell, 44, the most feared raider to
set foot on Madison Avenue.


    Last week Sorrell was on the attack again, singling out one
of the oldest and most venerable names in U.S. advertising. In
an unwelcome bid, the Briton proposed to pay $730 million to
acquire the Ogilvy Group, which owns Ogilvy & Mather, the fifth
largest U.S. advertising firm. The agency, which created the
Man in the Hathaway Shirt campaign and today's sleek celebrity
ads for American Express, has been independent since it was
founded in 1948. If Sorrell were to succeed in taking over
Ogilvy, his combined empire (estimated annual billings: $13.5
billion) would rank a close second to Britain's Saatchi &
Saatchi, the world's largest ad firm. That may be more than a
coincidence, for Sorrell was once the top financial officer for
Saatchi. Rivals in the ad industry charge that his acquisition
campaign is driven by a need to top his former employers.

    The son of a London retailing executive, and a graduate of
Cambridge University and Harvard Business School, Sorrell worked
in posts ranging from sports promotion to food retailing before
landing a job with the Saatchis in 1977. He spent eight years
helping manage that firm's headlong growth, then left to build
his own empire. Sorrell and a partner paid $676,000 for a
controlling share in WPP in 1985, then used the company as an
acquisition vehicle; they have bought 39 marketing and
advertising firms so far. His most stunning triumph was the
1987 purchase of the JWT Group, an American conglomerate seven
times the size of WPP. The $566 million deal was the first
hostile takeover in the U.S. ad industry. Under WPP's control,
JWT's pretax profit margin has increased from a weak 5% of sales
to a respectable 10%.

    Sorrell's takeover of Lord, Geller, Federico, Einstein,
which was part of the JWT purchase, has proved more
troublesome. Nine months after the deal, co-founder Dick Lord
and five top executives walked out and formed a rival firm that
they staffed with their former colleagues. Today both sides are
mired in a court battle over the takeover and defection. Says
Lord: "Martin is a man of property. He believes that the ends
justify the means. I don't."

    Many investors are worried that the acquisition of Ogilvy
would depress WPP's earnings, since the debt assumed to
complete the deal could become a burden on the company. Sorrell
argues that the two agencies would complement each other. While
WPP's Thompson group is strong in Japan, Ogilvy has a firm hold
on the European market.

    Another concern is that agencies may be getting too big to
manage. Fast-growing and profitable Saatchi & Saatchi stunned
Wall Street two months ago with the news that for 1989 its
earnings will decline for the first time in 19 years. Sorrell
insists that he will encounter no such obstacles. But first he
will have to win the fight for Ogilvy, which is likely to seek
higher bidders. Among Sorrell's possible rivals for Ogilvy:
Japan's Dentsu and the U.S. firms Interpublic and Young &
Rubicam. Sorrell may not be the only ad mogul who still thinks
that bigger is better.