CLOSE-UP: INTERNATIONAL ISSUE/WPP-Y&R MERGER - Sorrell returns to top spot with Y&R acquisition. The WPP boss has done it again but not everyone is convinced

Two’s company. Three’s a world-beating advertising and communications group. Sir Martin Sorrell, the group chief executive of WPP, has always believed that size matters.

Two’s company. Three’s a world-beating advertising and

communications group. Sir Martin Sorrell, the group chief executive of

WPP, has always believed that size matters.



And now that he has secured Young & Rubicam as WPP’s third network -

joining J. Walter Thompson and Ogilvy & Mather - he will need to prove

that biggest is best.



WPP took over from Omnicom as the world’s largest advertising group last

Friday when Sorrell finally pulled off a dollars 4.7 billion deal after

months of on-off negotiations with Y&R.



Sorrell boasts: ’There is a philosophical and geographical fit between

Y&R and WPP. As a result of the deal, the US becomes more important and

the UK slightly less important. Mainland Europe and Latin America will

remain roughly the same.’



Tom Bell, now the chairman of Young & Rubicam Inc, has ceded the

ultimate running of Y&R to Sorrell. Bell only took over Y&R at the start

of the year and was expected to become a player in the WPP group.



’Two cooks spoil the broth,’ Bell says, quoting his mother’s mantra for

keeping his father out of the kitchen. ’Every organisation needs a clear

leader and Martin is a proven leader. I will work with him to ensure the

best transition and then, at an appropriate time, I will go on to do

other things.’



Bell’s capitulation is gracious. He could have struggled on to maintain

Y&R as an independent network, but has instead bowed to the inevitable

sooner rather than later. Bell knows that the advertising industry is,

from an international perspective, still relatively fragmented and that

consolidation is unavoidable.



While other global networks, such as Grey and Saatchi & Saatchi, insist

on keeping their options open, Y&R has, after a short courtship,

accepted the most eligible suitor on the block.



It is to Y&R’s credit that it was such a sought-after partner. Publicis

had been more than willing to step in as second choice if the WPP deal

didn’t go through.



The logic of the WPP deal is unmistakable. There are virtually no client

clashes and there will be no more headaches, either, for the Ford team

at Y&R. JWT and O&M have the bulk of the Ford business in the US but Y&R

has been successful in monopolising the client in Europe after a

protracted battle against O&M for the business.



Kevin King, who heads Y&R’s European Ford team, will no longer have to

wake up every morning knowing that Sorrell is plotting furiously to take

the business back from him. The threat was becoming so great that Satish

Korde, the global head of Y&R’s Ford business, had been brought to

London from New York to safeguard the account on an indefinite

secondment.



Despite the cynics’ claims that Y&R’s underlying health is not as robust

as recent figures suggest, the network has a good global breadth and

depth.



It also has a brand name that means something in each of the 73

countries where it has a total of 339 offices.



As the fourth-biggest agency in the US, Y&R is still winning business -

despite some recent high-profile losses - and has maintained an 11 per

cent organic growth rate. However, that rate will not be good enough for

Sorrell’s notoriously demanding regime and Y&R is, in truth, way behind

the top three in the US.



Y&R is globally successful in areas outside advertising. One of its

public relations arms, Burson-Marsteller, is the world’s largest PR

company, while Cohn & Wolfe is also a respected name in the same market.

Y&R’s direct arm, Impiric, is one of only two global brands in its field

- the other, OgilvyOne, is also owned by WPP.



The Media Edge, Y&R’s full-service media network, has been struggling to

establish itself as a global brand and is the biggest question mark in

the portfolio. Nevertheless, The Media Edge is a respectable enough

network, although its long-term future must be open to question.



Sorrell hints at ’opportunities’ which ’may come to pass’. His plan for

media in the enlarged WPP is, he says, to ’take the Japanese approach

and look at it ’bottom up’. If Irwin Gottlieb (MindShare) and Beth

Jordan (Media Edge) thought it was a good idea to merge the two, then

yes. The only issue is whether or not they see an advantage.’



It is not yet certain that WPP shareholders see any advantage in the

deal. Share prices went down in anticipation of the final settlement,

perhaps because stock markets recalled the difficulties that Sorrell had

after taking over his other two agency networks.



But the JWT (1987) and O&M (1989) deals came about through hostile bids

and both dealt severe blows to Sorrell’s credibility. The Y&R deal,

although fraught at times, has ultimately been an amicable one. Bell

claims that there was ’no animosity. Just good hard fighting. We both

have the responsibility to do our best for our constituents. That’s what

negotiations are all about.’



Sorrell’s expectations are that the deal will enhance long-term growth

prospects and lead to higher organic growth. He has also promised

shareholders ’synergies’ of dollars 30 million - although he will not

admit to redundancy plans, he claims that ’rejuggling’ and the

purchasing and leverage savings that size brings will all contribute to

the cutting of costs.



Apart from the numbers, Sorrell is determined that the new, improved WPP

will ’attract, maintain and motivate talent. WPP will become the finest

place to work for creative talent.’ He doesn’t like the suggestion that

although WPP has overtaken Omnicom in the billings league, in the

creative league the number one spot remains unchallenged.



’I bristle when people are dismissive of our creative capabilities,’

Sorrell says, pointing out that creative minds are just as relevant to

market research as they are to advertising. But he admits that ’there is

more to do’ at WPP and that he admires Omnicom’s creative emphasis.



Only up to a point, though. ’Strategically, creativity is not a reason

to be. It is not the way to build a business. You can group creative

agencies together but what is the strategic benefit for them of being

part of a group?’



For WPP, which still makes the wire and plastic products from which it

took its name, the onus must be on maintaining its number one spot.

Having committed on a grand scale to a diversified but strategically

focused future, Sorrell has set himself, and WPP, a very public

challenge to remain number one.



WPP

Advertising             J. Walter Thompson,

                        Ogilvy & Mather,

                        Conquest

Media                   MindShare

Direct Marketing        OgilvyOne

Interactive             wpp.com, Syzygy

Public Relations        Hill & Knowlton,

                        Buchanan

                        Communications

Branding & Design       Enterprise IG

Y&R

Advertising             Young & Rubicam

Media                   The Media Edge

Direct Marketing        Impiric

Interactive             Y&R 2.1

Public Relations        Burson-Marsteller,

                        Cohn & Wolfe

Branding & Design       Landor Associates



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