Sir Martin Sorrell’s deal to buy MediaMonks has ‘jeopardised’ his right to financial payouts worth up to £20m from former employer WPP, the company claims.
Sorrell today tasted victory over WPP, where he spent 33 years as chief executive before resigning amid an acrimonious internal investigation in April, after beating his old firm to the acquisition of Dutch production outfit MediaMonks for £266m.
Though Sorrell has won this battle, the war of words between the world’s biggest marcomms group and its erstwhile chief executive rages on.
WPP is alleging that because MediaMonks was already a takeover target before Sorrell stepped down, the 73-year-old breached his contract by making a bid for it with his new firm S4 Capital.
Now it is threatening to withhold the handsome payments Sorrell was due to receive over the next four years as part of an incentive package known as the long-term investment plan (LTIP).
“WPP’s lawyers wrote to Sir Martin’s lawyers last week pointing out the breach of Sir Martin’s confidentiality undertakings in his approach to MediaMonks after his resignation from WPP,” a company spokesperson said.
“Despite subsequent protestations from Sir Martin’s lawyers, we are well aware of the facts and he has jeopardised his LTIP entitlement.”
Reports have suggested Sorrell could receive as much as £20m from WPP in the wake of his departure, but the actual figure was always likely to be lower because the amount owed is tied to the holding company's financial performance over a five-year period in which it has struggled to hit targets.
The Drum understands WPP is now seriously contemplating blocking the next payment, due in March 2019, meaning Sorrell may not see anything at all unless he is willing to embark on a legal challenge.
A spokesperson for Sorrell said he "vigorously denies" any allegation that he has breached his contract.
Sorrell himself earlier hailed the MediaMonks acquisition as the first step in "building a new age, new era, digital agency platform for clients".
One source close to the negotiations told The Drum: “MediaMonks is a good business which I understand attracted a lot of trade buyer interest at reasonable acquisition multiples but S4 Capital seems to have abandoned commercial considerations in its desperate pursuit of landing the asset.
"The big winner would appear to be Bencis, the 55% private equity owner of Mediamonks – it must feel like Christmas has come early."
M&A advisors, however, have been more complimentary about Sorrell's first deal post-WPP. "As a a first one it is pretty good," said Keith Hunt, managing partner at Results International. "One issue is that there's very few targets or any scale out there. MediaMonks does have that."
Sorrell has scarcely been out of the headlines since exiting WPP in April following an investigation into the alleged misuse of company funds, which he denies. In an interview with The Drum in Cannes last month, he described the press coverage around his controversial departure as "fanciful".