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Abu Dhabi, UAESunday 22 July 2018

Martin Sorrell's return to deal making may deepen rift with WPP

His first deal since leaving WPP could be in breach of confidentiality agreement and may jeopardise his bonus payments

Martin Sorrell quit as the head of WPP in April. His first deal since departure may put him on collision course with the old employer. AFP
Martin Sorrell quit as the head of WPP in April. His first deal since departure may put him on collision course with the old employer. AFP

It’s barely a month since former WPP boss Sir Martin Sorrell called his new business venture a “peanut” that could not rival his, industry giant, previous employer. But, as the advertising heavyweight also later said: "It does occur to me that some people have peanut allergies."

In it’s first acquisition, Sir Martin’s S4 Capital captured Dutch digital agency Media Monks Multimedia Holding for around €300 million (Dh1290m) – a move that beat out WPP and other competitors.

The move reportedly angered WPP executives and Sir Martin could now risk not receiving millions in bonuses after failing to adhere to an agreement with the company.

At the fiery WPP AGM last month shareholders were split over the fate of Sir Martin, who abruptly resigned in April from the company he built, amid allegations he misused company money and verbally abused staff. WPP Chairman Roberto Quarta divulged little over the murky circumstances citing confidentially clauses. He did say, however, that Sir Martin had been found not guilty of gross misconduct and would continue to receive the £19 million in long-term bonus payments as such.

For many shareholders at the AGM they were ambivalent over the money despite the claims against Sir Martin. They felt it was deserving for a man who had powerful vision had propelled WPP to the top and given them strong returns. They were, however, concerned that he had set up a new, seemingly rival company that could harm WPP profits at a time when its status was precarious.

One shareholder seemingly predicted future events in a question to the WPP chairman: “I see he intends to set up in competition with us. Surely, that must constitute gross misconduct if he’s competing with the company?”

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Read more:

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WPP requires total overhaul after Sorrell's shock exit, says stand-in chief

Thirty per cent of WPP shareholders object to ex-CEO financial package

Martin Sorrell quits as head of WPP advertising agency

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Mr Quarta laughed off any suggestions the new venture, citing Sir Martin’s comments, could rival a global giant like WPP, but appeared to send a veiled threat to his former colleague. “All the management off WPP have confidentiality agreements and obviously Martin would not want to jeopardise the terms and conditions of that.”

Included in Sir Martin’s agreement was a clause that he could not pursue targets WPP had previously considered when the former chief executive was in charge, or his £19m worth of bonus payments would not be paid.

The BBC reported that Media Monks was one of those companies and that WPP lawyers had written to Sir Martin to say they would stop the payment. He insisted his own lawyers had advised he was not breaking any clauses.

Observers also said that he vastly overpaid for Media Monks, with rumours swirling he offered as much as €50m more than WPP and competitors as he sought to get one over on his previous company.

At last month’s AGM the WPP leadership said they were keen to focus on creativity and technology. As investors began to worry about its ability to adapt to changing market shifts, WPP attempted acquisition of Media Monks was likely an attempt to remedy these fears.

Instead it is Sir Martin who has won out, even at a cost. In a statement he said the next move will be to build out the Media Monks platform further, to add “meaningful data analytics and digital media buying.” He said: “This represents a significant step in building a new age, new era, digital agency platform for clients.”

WPP insiders said Sir Martin’s move had "something of the vendetta about it" in comments to the BBC. Others questioned whether he bore a grudge against his former employers and, as such, his business judgement was clouded. Sir Martin rebuffed these accusations and said WPP was simply concerned at the power S4 Capital had – it was going from a peanut to a “coconut.”