WPP CEO Martin Sorrell has built an advertising and marketing-services colossus by snapping up famous agencies on both sides of the Atlantic. A fighter to the end

SATURDAY, APRIL 6, 2013

No Ordinary Ad Man

By JONATHAN BUCK  | MORE ARTICLES BY AUTHOR

WPP CEO Martin Sorrell has built an advertising and marketing-services colossus by snapping up famous agencies on both sides of the Atlantic. A fighter to the end.

The advertising industry has long been known for colorful, larger-than-life characters. But few—past, present, or fictional (think Mad Men‘s Don Draper)—can compete with Martin Sorrell.

The head of London-based WPP, Sorrell is charming and feisty, puckish and ruthless, and seems to make money and enemies with equal dispatch. The legendary ad man David Ogilvy dismissed him as an “odious little jerk” when Sorrell sought to buy the U.S. advertising firm Ogilvy & Mather in 1989. But Sorrell, as usual, got the last laugh, winning both the company and an apology from Ogilvy, who went on to serve as WPP’s nonexecutive chairman for the next three years.

Sorrell, 68, has been called a bean counter, but then, his globe-spanning advertising and marketing-services conglomerate amounts to a huge hill of beans. Launched in 1985 with the friendly takeover of a British shopping-cart maker known as Wire & Plastic Products, WPP (ticker: WPP.U.K.) today employs 165,000 people in 110 countries, and operates under dozens of separate brands. It reported worldwide billings of more than $70 billion in 2012, and counts Google (GOOG) and News Corp. (NWSA), the owner of Barron’s, as its biggest customers.Look out, Don Draper. The natty Sorrell rules the real world of advertising.

WPP has grown by gobbling up major and lesser agencies on both sides of the Atlantic and around the world. Many former giants of the U.S. advertising industry, including JWT, Ogilvy, Young & Rubicam, and Grey, now reside under its capacious corporate umbrella, as do public-relations leaders Burson-Marsteller and Hill+Knowlton, U.K.-based market researcher Taylor Nelson Sofres, and the huge media manager GroupM.

SORRELL’S QUEST TO BUILD a global marketing-services company almost ran aground in the early 1990s, after a debt-fueled acquisition spree left WPP unable to pay the bills. The company avoided receivership by restructuring more than $1 billion of loans. Sorrell was chastened by the experience, but that didn’t stop him from becoming one of the industry’s most prolific deal makers. WPP’s finances are in much better shape these days, with net debt as of Dec. 30 at less than two times annual cash flow.

There have been other controversies, too. Sorrell was castigated for redomiciling WPP in Ireland in 2008 after the British government threatened to tax corporate profits overseas as well as at home. The legislation never materialized, however, and the company returned to the U.K. this year.

Then there’s the matter of Sorrell’s compensation, which routinely riles shareholders, although not the WPP board. In 2011 Sorrell was awarded a pay package of more than $10 million; the 2012 figures haven’t been finalized yet. Sorrell, who holds a 1.5% stake in WPP worth about $300 million, argues that his pay is in line with peers.

Sorrell’s contribution to the communications industry also has been recognized; he was given a knighthood in 2000.

SORRELL’S COMPENSATION REFLECTS, in part, WPP’s financial growth, particularly in recent years. The company posted revenue of 10.4 billion pounds ($16.5 billion) in 2012, and earnings of £823 million in 2012, up almost 80% from the trough in 2009. Earnings per share were 73 pence, up from 68 pence in 2011, but are expected to rise to 81 pence this year and 89 pence in 2014, as profit margins improve.

WPP’s London-traded shares closed at £10.24 on Friday, and are up more than 20% in the past 12 months and 50% in the past three years. The company also trades in the U.S. via American depositary receipts (WPPGY), which finished last week at about $80. Shares yield 2.8%.

Sorrell’s fortune took a hit in 2005 when, after his first marriage ended, he was hit with a divorce settlement reportedly valued at $45.7 million, one of the biggest in the U.K. at the time. He has since remarried, and his new wife, Cristiana Falcone, works for the Inter-American Development Bank as well as the World Economic Forum.

Sorrell says he fell into advertising by accident. Born in London and educated at Cambridge and Harvard, where he earned an M.B.A., he says he would have stayed in the U.S. but for the risk of being called up for military service in the late 1960s and sent to Vietnam. “I’m an only kid, and my mother refused to let me be drafted,” he says.

His grandparents, who were Jewish, emigrated to the U.K. from Eastern Europe. To escape anti-Semitism, his father changed the family name to Sorrell after the title of his favorite book, Sorrell and Son, by Warwick Deeping, which tells the story of a father abandoned by his wife who makes sacrifices to raise his only son. The family’s original name? “That’s a family secret!” Sorrell says via e-mail.

SORRELL WENT TO WORK for the American sports agent Mark McCormack upon his return to the U.K., and became friendly with sporting icons of the 1970s, particularly in the worlds of cricket and Formula One motor racing. He retains a passion for both sports, and plays cricket for WPP teams several times a year. He also sits on the board of Alpha Topco, Formula One’s holding company. “I could spend my life at Grand Prix,” he says.

He next took a job as financial advisor to James Gulliver, a British entrepreneur with interests in food retailing, but says the title “was far too grand. I was his personal assistant, his bag carrier, basically.”

Gulliver’s investments included a stake in an advertising agency that was injected into a shell company, which in turn became the object of a reverse takeover by Saatchi & Saatchi, the hottest U.K. advertising agency in the late 1970s and early ’80s. Sorrell was appointed finance chief in 1977 and became the public face of the company to investors, while brothers Charles and Maurice Saatchi ran the creative side. Sorrell became known as the third Saatchi brother, although several others also have been described as such. He remained at Saatchi & Saatchi until 1985, when he decided to strike out on his own in the ad business

The Saatchis weren’t pleased by his departure, “but, interestingly, what people forget is that they took a stake in Wire & Plastic Products,” he says.

After becoming CEO of WPP in 1986, Sorrell wasted little time embarking on a string of acquisitions in the advertising industry. The audacious purchase the following year of J. Walter Thompson put his new venture on the map. At the time, JWT had a market value 13 times that of WPP, but was in poor shape. Sorrell’s well-timed hostile takeover succeeded within two weeks.

SORRELL HAS MADE MANY more landmark deals over the years, and acquisitions are designed to add as much as 5% growth to revenue and profit each year. That’s a big challenge for a company of WPP’s size, but not impossible. “You are talking about adding a very big agency—a multinational global agency—to our base every year,” he says.

He encourages companies under the WPP umbrella to work together, but also to vie for the same business. “We get them to compete and cooperate—to kiss and punch,” he says.

Sorrell also encourages cooperative competition among employees, but suggests there is more punching than kissing among the company’s stars. “Getting good people to work together is very difficult,” he says. “The paradox is, the better they are, the more difficult it is to get them to play together.”

A tendency toward pugilism might also be true of the boss, who has provoked the ire of numerous rivals since launching his own company. Sorrell has a history of feuding with competitors, including the leaders of French rivals Publicis Groupe (PUB.France) andHavas (HAV.France). Last summer, for example, after Publicis denied rumors that it was stalking the U.S. advertising conglomerate Interpublic Group (IPG), Sorrell was quoted as saying, “I wouldn’t dismiss those rumors as they are trying to dismiss them. They are obviously trying to negate the impact on their share price.”

To which Publicis CEO Maurice Levy replied, “I personally couldn’t care less about Martin Sorrell, and what he thinks or says about Publicis Groupe is always rubbish.”

Sorrell, who often wears dark-rimmed spectacles, is a man with his finger on the pulse of the industry and the culture. After more than 35 years in the advertising business, he says all the change he has seen fits into two categories—technological and geographic. WPP has embraced the evolution of both.

New media represents one-third of WPP’s business, and is growing by about a percentage point a year, as traditional forms of advertising decline in mature markets. Sorrell points to Google as an example of what is possible in digital advertising. The Internet giant’s search, display, video, social, and mobile services accounted for $2 billion of WPP’s ad spend in 2012.

“The two sexiest high-growth areas are video and mobile, and they are becoming more and more important,” says Sorrell. “Really, it is a question of developing the same sort of coverage with Facebook [FB], Twitter, AOL [AOL], Yahoo! [YHOO], and Microsoft[MSFT].”

As for geographic expansion, WPP has been an exemplar of globalization, accompanying its clients into new markets. It holds leading positions in China and India, and garners about a third of its revenue from emerging economies.

SORRELL SHOWS NO SIGNS of slowing down. WPP says its board periodically discusses internal and external candidates best qualified to succeed him, but doesn’t comment on succession-planning for fear of feeding speculation or causing distraction.

Until he decides or is forced to hand over control, Sorrell will continue to do business the way he has always done it. “You have to kick and claw your way,” he says.