WPP chief Mark Read has described the $4bn jettison of its majority stake in research company Kantar as the last big play in the holding giant’s turnaround plan.
“This was sort of the last major structural piece in the puzzle to set WPP up for success,” he told The Drum.
“From a structural perspective, we've taken all of the major steps that we need to take. Now, we need to really focus on the investments we need to make in creativity, in technology and on our work.”
After months of negotiations, WPP confirmed it had sold 60% of its stake in Kantar to private equity firm Bain on Friday (12 July). The move will see the measurement and research division benefit from increased investment to hire more talent and fund tech investments to help it compete in the burgeoning data market.
Post-tax, WPP is set to raise $3.1bn from the sale with 60% of the gains to be funnelled into reducing the company’s $5.1bn debt. Around $1.2bn will be returned to shareholders.
Budget-squeezing clients; significant client losses from the likes of Ford and GSK; competition from digital giants like Facebook; and increased circling from consultancies have all contributed to WPP’s battle to return to growth. In April, its Q1 like-for-like net sales dropped 8.5% in North America, the group’s biggest market. Group net sales were down 2.8%.
The Kantar sale marks a turning point in Read’s mission to return the businesses’ balance sheet to health after revealing his three-year blueprint to return the Ogilvy and GroupM owner back to growth last December.
Following his succession of long-time boss Sir Martin Sorrell, Read pledged to position WPP as a market leader in creativity and technology by streamlining its "unwieldy" structure.
WPP will retain a 40% stake in the business, which Read said will ensure clients still get access to its services and capabilities while creating value for investors: “Kantar has an exciting future, so it’s about the strategic and financial benefit for us.”
Emotional, and rational
Speaking in March, Read admitted that “emotionally” he would have preferred to hold on to Kantar but selling was the “rational decision”. Does he feel the same now?
“It’s about balance isn't it? We've got a lot of things to do at, at WPP and we can benefit from focusing on the businesses that we have and Kantar will benefit from the focus that it will have in this new structure,” he explained.
“Emotionally I may feel the same, but there's a number of things we need to do as a group to return the business to growth in terms of simplifying structure, using our leverage and putting the business in the right position for the future. This is the right structure at this point both rationally and emotionally.”
The Kantar sale comes in the same fortnight that WPP rival Publicis Groupe completed its acquisition of data business Epsilon. However, Read quashed the notion that WPP’s slimming down efforts would make it less well-placed to compete in the data arena.
“[Selling Kantar] isn’t in any way a reduction of our commitment to data-driven marketing. We’re focused on investments in technology that enable us to use data, not the ownership of data per se,” he insisted, saying WPP was moving to “data agnostic model”.
What will Kantar look like under Bain?
As for how Kantar will look post-sale, chief executive Eric Salama has already outlined his vision for a faster, more technology-driven business.
Earlier this year, Kantar consolidated all of its individual brands and services into its flagship brand, retiring silos like Kantar Media, Kantar Millward Brown, Lightspeed and Kantar Worldpanel, as well as all of its country-specific brands.
It’s also doubled down on its AI capabilities, unveiling a suite of new tools last month which help advertisers better plan and measure the impact of campaigns using machine learning – an area Salama believes will benefit from the investment Bain can now offer.
“On the investment side, we’ll be able to look at acquisitions with greater scale going forward, as well as investing in technology and talent,” he said.
“We’re already delivering more data and insights for clients in real-time, at speed through more automated processes. In joining up data through AI solutions in scaling products and services to many more markets, we can see opportunities to do things in this new structure and do them much faster than we could have otherwise.”
He shrugged off the suggestion that remodelling Kantar’s legacy baggage will pose a challenge for Bain amid increasing competition from dedicated AI-native market intelligence firms.
“It's not just about having a whizzy technology, it's about having talent and technology that’s there to actually provide solutions and deliver those at the same speed that small companies can do,” he asserted. “So I feel very, very comfortable that we can innovate and deliver to our clients in a way that any small company can.”