TIME: Almanac 1990/1990 Time Magazine Compact Almanac, The (1991)(Time).iso/time/051589/05158900.018

Text File | 1990-09-22 | 4KB | 64 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.