Opinion: Perspective - Time for M&C Saatchi to cash in on its brand name

You might think that the first flotation in advertising for years would have to wait until the memory of Lord Saatchi's catastrophic bust-up with David Herro and the lessons of the dotcom boom-float-bust era had faded into history. How short memories are. As we report this week, M&C Saatchi hopes to sell a significant minority of itself on AIM, the London Stock Exchange's junior market for small, fast-growing companies.

As ever, M&C is ahead of the game, tapping into an enthusiasm for new shares. In America 29 companies have raised more than $6 billion this year, compared with three deals producing less than $300 million by the same point in 2003. Japan has already seen 40 new issues in 2004, more than any other rich country, according to Dealogic, which tracks such things.

If faith as much as hard analysis is indeed the indicator of likely success, then M&C's proposition should generate real interest. It is a confident, well-run business that values its independence highly. It has more than 600 employees worldwide, strong presence in the UK and Asia-Pacific, no debt and a successful track record of organic growth. Nine years old, it is a serious, establishment player run by an experienced management team.

If Lord Saatchi is kept well away from Herro and his ilk, M&C's top team should play well with the City. Unlike many other agency managements, M&C's public face has always been managed with the same kind of critical care that was devoted to the images of the politicians the team once helped seek election.

Presentation and spin is M&C's stock in trade. Its press releases famously round up the wins to the nearest ten million. In presenting its case to analysts these skills will be crucial.

What M&C lacks, however, is scale, particularly in Europe but also in the US where the New York operation has failed to take off. Apart from offering a quick and profitable route to retirement for M&C's founding partners - they will only be tied in for two years, much less onerous than if they had done a deal with one of the groups - flotation will give them money to expand into Europe and to open offices in major markets there. It will also give them shares that can be used to reward and tie in senior executives.

At present, M&C is a bit stuck. They have an alliance with Publicis Groupe on BA, mostly realised through ZenithOptimedia, but it effectively prohibits them from pitching for anything that conflicts with Publicis' interests. However, their links with BA, Qantas, Gallaher, Scottish Courage, Glaxo SmithKline, LVMH et al could be translated into broader international client relationships.

Another barrier to a deal has been M&C's desire to realise an unrealistically high price for itself in negotiations with suitors. Sure enough, the multiple attached to this deal is 17, putting it on the high end of the scale.

M&C's partners now face long months of preparation and a future of dealing with analysts who know little about advertising and probably care even less. They will be interested in figures, bigger figures, every quarter.

If the going gets tough, M&C should use as its inspiration Abbott Mead Vickers' successful flotation back in 1985. Twelve years later, on its 20th birthday, AMV's market capitalisation had risen by more than ten.

Finally, here's a mischievous thought. Will WPP's Sir Martin Sorrell, Saatchi & Saatchi's one-time finance director and a reportedly persistent suitor of M&C Saatchi in recent years, sign up as one of the early investors?


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