'Q2 will be a blood bath': Sir Martin Sorrell on Cannes, M&A and the Covid-19 bounceback

"Q2 is going to be a blood bath" / World Economic Forum

Sir Martin Sorrell, executive chairman of S4 Capital, has predicted that the second quarter of the year will be “a bloodbath” for many companies, especially those who are not digitally strong.

Speaking to The Drum as part of its Digital Transformation Festival, Sorrell said he had witnessed working practices change across business in recent weeks but was less enthusiastic than others to applaud how quickly it had taken place within some companies.

“I hear several people congratulating themselves about how amazed they are that their people can work from home," he said. "This is something we have been doing at S4 Capital already. Our 2,500 people are perfectly attuned to what is happening now because they are used to working from home, working 24/7 and being agile.

"This is, in a sense, nothing new to them… this industry is full of people who have adapted to flexible working hours for many months if not years. This crisis will accelerate the technology and make people much more comfortable using it.”

Sorrell believes acquisitions and new business will likely to be affected, yet said it was possible to agree deals through virtual means.

On that front, he took the opportunity to call on Cannes Lions to change how it operates and what it facilitates.

“I will seriously rethink my travel patterns," he said. "Ascential should seriously rethink the timing and nature of festival, where it takes place and how. Is it necessary to bring together so many people at vast expense in the south of France at that time of year or are there better times to do it?

"It might well be, given examination, that they decide to carry on doing it, which would be a mistake. They should radically rethink.”

Sorrell also spoke about the impact the coronavirus would have on business' performance around the world, expecting to see “a reverse squared root” rather than the previously suggested V-shape in how the world economy will recover towards Q4.

One sector he did see such a recovery from however, was the mergers and acquisition space, noting a long ‘dry power’ venture capital fund is still to be spent by the likes of Silver Lake and Bain Capital.

The founder added he is eyeballing smaller acquisitions for S4 Capital, focusing on data and analytics capabilities.

“We have compressed changes of behaviour into two or three weeks of lock-down," he added. "Well stand by, it’s going to get even tougher.

"There will be significant structural changes in the agency industry and I would see private equity having a good hard look at the sector and coming to the view that the holding companies would be better split up or privatized,

“Media owners will accelerate their digital communications and, finally, enterprise managers, who before Covid-19 were probably feeling relatively comfortable and not wanting to disturb the status quo, will disturb that now.

"Q2 will be such a blood bath. Companies that were flirting with significant digital disruption will really go hard and clear the decks."

Watch the full interview with Sir Martin Sorrell filmed as part of The Drum’s Digital Transformation Festival, above.

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