‘It’s rather sad’ – M&C Saatchi exodus leaves more questions than answers
What’s next for beleaguered M&C Saatchi is the question now being asked after the resignation of the agency’s co-founder and three fellow directors in a shock move many have described as a “sad” ending to the advertising mogul’s career.
Yesterday (10 December) Lord Maurice Saatchi resigned from the agency alongside board directors Lord Michael Dobbs, Sir Michael Peat and Lorna Tilbian following a year of profit warnings, lost clients and a “cock-up in the accounts department”.
Defiant chairman Jeremy Sinclair vowed the business was “determined to restore the operational performance and profitability” and has started a process to reconstruct the board with new independent directors who will have “a mandate to conduct a full review of all aspects of our governance”.
Sir Martin Sorrell began his advertising career at Saatchi & Saatchi (the unrelated creative shop later acquired by Publicis) in 1977, under brothers Charles and Maurice. The ex-WPP chief, now founder of S4 Capital, simply said of his former boss’s departure: “It’s rather sad really.”
It’s a sentiment echoed by others in the industry. Ollie Latham, planning director at VCCP said: “This is such sad news. Lord Saatchi always smiled and waved when you passed him in the hallways. He set up a poetry foundation in memory of his wife. He is an advertising titan who deserved a much better end to his career.”
Saatchi's departure comes after a devastating year for the self-declared ‘biggest independent creative agency in the world’, which after being established nearly 25 years ago now operates in almost 30 markets and owns the likes of Lida, MCD Partners and The Source.
In August, PwC discovered a series of historical “misstatements” in the company's accounts, including an "overstated accrued income" of £2.6m. Last week, it issued its second profit warning when it revealed an £11.6m hole in its earnings. Clients have also fled, with NatWest, which contributed a significant chunk of revenue, recently moving its advertising account to The&Partnership resulting in a round of voluntary redundancies.
It will now fall on chief executive David Kershaw, founding partner Bill Muirhead, chief financial officer Mickey Kalifa and finance director Andy Blackstone to turn the ship. Sources told The Drum Kershaw intended to resign but was persuaded to remain.
All past and present directors have declined to comment.
Tony Walford, a partner at corporate finance consultancy Green Square, said the company line on the proposed reforms and reasons for Saatchi’s exit have left more questions than answers.
“The resignations are over the proposed reforms in respect of governance and the restructuring around this. What we don’t know is whether they felt the proposed restructuring is too stringent, isn’t strong enough, because they don’t like what is being proposed from an operational point of view or because maybe they wanted David Kershaw to go,” he said.
“We have to wait to see what else comes out over the coming days (I’m sure there will be a lot) that will put things into more perspective.”
While the latest personnel exits might not be felt on a day-to-day basis when it comes to client management or delivery, it has sent a signal to the market that the departing quartet were unwilling, or unable, to provide solidarity during the most challenging period in the agency's history. After voting with their feet, M&C Saatchi’s share price fell almost 6%.
“A completely leftfield thought could be they are looking to take advantage of the collapsed share price by raising private equity money and taking it private,” suggested Walford.
“Maurice keeps his baby, much less governance and public scrutiny as a private company and, if the share price falls further, it could be a bit of a bargain (although quite an expensive thing for Maurice to do if the price drops again due to their departures, given the 4.5% shareholding he already has). That said, Lorna’s prior banking background would certainly help facilitate something like this.”
Meanwhile, rumours have quickly swirled in ad land that another buyer might be ready to swoop in and snap up the bruised advertising group. City traders have posited that Accenture Interactive could make a £70m play in a bid to build out its own sports marketing and sponsorship offering through M&C Saatchi’s Sport and Entertainment agency.
“They’ve literally had the perfect annus horribilis - the accounting disasters, loss of an anchor client and now this," surmised Walford. "Thus it’s really hard to predict what the future will hold. David Kershaw must be desperate to see the back of 2019."