PERSPECTIVE: Teflon Man's tactics shows the strain as investors bare teeth

Throughout his career Michael Bungey has been forced to live with a particularly unflattering nickname: Teflon Man. It is based on the fact that Bates has gone through almost as many management teams as it has name changes - Dorland, BSB Dorland, Bates Dorland, Bates UK - and every time Bungey has survived lawsuits and turmoil.

After the tremors of the past two years, however, Bungey now finds himself in the invidious position of needing those teflon qualities. In four months late last year Cordiant issued three profit warnings. This year it has seen two large US clients - Hyundai and Wendy's - defect. This week, two major Cordiant shareholders began a drive to shake up its senior management ranks.

One of them is David Herro, the US investor who helped oust Maurice Saatchi from Saatchi & Saatchi. Herro's company, Harris Associates, owns a 9.29 per cent stake in Cordiant. The other is Active Value, led by Julian Treger and Brian Myerson, which has accumulated a 9.06 per cent stake. They are both by nature the kind of shareholders who will agitate to get what they want. With a combined stake of almost 20 per cent, Herro and co now hold considerable sway over Cordiant's future.

Unquestionably, Bungey cannot be held responsible for all of Cordiant's woes. The global recession, for starters, is out of his control. But he made strategic choices that now look flawed. Amputated from the former Saatchi & Saatchi empire at the end of 1997, Cordiant had two choices: become a seriously big player, or find a friendly buyer. That Bungey chose the first route was sound in theory, but even back in 1997 three questions could have been posed.

Where were the powerhouse agencies and the renowned agency managers within Cordiant that would serve as a magnet to potential acquisition targets?

Answer: there were none, Cordiant has only one advertising network, Bates.

Was Cordiant's market clout sufficient to attract these acquisitions?

Answer: no. Given the consolidation frenzy of the 90s, which ad agency jewels remained to be purchased? Answer: precious few, which is why Bungey had to commit himself to building a broader marketing services group with the Lighthouse Global Network and Healthworld.

Cordiant's survival depends on it meeting its obligations to creditors and with this in mind its 25 per cent stake in Zenith Optimedia could serve as a get out of jail free card if it were sold to Publicis. But that in turn would leave Cordiant even more exposed and even less valuable.

Examine all these facts and it's easy to see why some people would have a great quarrel in letting Bungey off the hook. Now, with investors applying physiological pressure and forcing his eye even further off the ball, it looks inevitable that sooner or later Cordiant will be sold for a knock-down price. But who in their right mind would want it?

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