The Executive Lounge

Featuring

Sir Martin Sorrell

Founder & Executive Chairman, S4 Capital

Hosted by

Michael Seidler

Founder & CEO, Madison Alley Global Ventures

June 8, 2022 @ 11 am – 12 pm ET

EXECUTIVE HIGHLIGHTS

Overview of Sir Martin Sorrell

· Founder and Executive Chairman of S Capital plc (London Stock Exchange: SFOR.L)

· Founder and CEO of WPP

· Ranked as the second-best CEO in the world by the Harvard Business Review in 2017

· Nominated as one of TIME’s 100 Most Influential People.

S4 Capital

· A communications business for the new marketing age

· Founded in 2018

· 8,400 people

· 33 countries

· 1 unitary structure

– Interview –

Overview of S4 Capital

Sir Martin Sorrell named S4 Capital for its four-pronged approach: purely digital (the fastest-growing segment of ad, marketing and media, now at 15-20% growth per year); delivering a Holy Trinity of first party data, digital content and programmatic; being faster-better-cheaper; and doing it all through a unitary structure.

Over the past four years, S4 Capital has completed 30 transactions, half in content and the other half in data/analytics. When S4 Capital acquired its first company—Media Monks—Sorrell rebranded the company as Media.Monks, a nod to its heritage in content, data and technology

and its forward focus on creating a unitary approach. “Clients want access to all talent in the easiest way. One brand—one organization—is the Holy Grail,” Sorrell said.

Strategic M&A Opportunities

When evaluating a potential merger, Sir Martin Sorrell has four priorities: topline growth, margins (EBITDA in the 20%+ range), management ownership, and assurance that the business is not susceptible to technological change. Additionally, there must be philosophical alignment on S4 Capital’s approach to the Holy Trinity, faster-better-cheaper and unitary structure.

Sorrell said companies with the most growth during COVID have been dominated by technology, telecommunications and healthcare—and S4 Capital, which has a strong base in tech and telecom, looks at potential mergers for their ability to help the company broaden its scope. “We’re looking for buyers that want to buy in, not sell out. We’re here to build a business based on a model that works and develop relationships over a long period,” he said.

Four years after starting S4 Capital, Sorrell says his company has eight “whopper” accounts, including Alphabet, Meta, Mondelez and HP, which he defines as $20 million in account revenue per year. The goal, he said, is for the company to get to 20-squared—or 20 accounts at $20 million per year. He said S4 Capital has acquired most of its “whopper” clients through a land-and-expand strategy (he landed Meta through is acquisition of Jam3). “Margins over time are better if you do it through land and expand,” Sorrell said, noting that landing “whopper” accounts proves that the model works and achieves scale.

S4 Capital’s Merger with Jam3

According to Sorrell, Jam3—with its strong creative culture and content capabilities—was an ideal partner for Media.Monks because of its core focus on content. Madison Alley served as a strategic advisor to Jam3 on its merger with S4 Capital.

Sorrell said you can’t confuse founders with managers. “Managers who run companies are different from people who start a business. They are running them to reinforce their own positions. You can see that with advertising holding companies. Most are drifting and underperforming. There is no value creation,” Sorrell said.

S4 Capital’s Merger with TheoremOne

Both Sorrell and Brady Brim-DeForest, CEO of TheoremOne, S4 Capital’s newest acquisition, for which Madison Alley served as a strategic advisor on the transaction, said the two companies had a fundamental philosophical alignment.

For his part, Brim-DeForest said that his focus is on equipping clients with the tools they need to attract and retain top, next-gen talent. “TheoremOne helps enterprises innovate. Often, clients come to us with legacy technology that is long in the tooth. So much of the digital ecosystem is focused on B2C, and internal users who are driving growth tend to be left behind, especially as workforces age out. They need next-gen talent that provides an experience to digital natives and allows them to compete with the Facebooks and Googles of the world in terms of attracting and retaining talent,” Brim-DeForest said.

For advertising holding companies, digital transformation presents a trillion-dollar opportunity. Consulting companies such as Accenture have been quickly scooping companies in the digital-transformation space. And now, advertising holding companies are following suit, which presents even greater potential opportunity given that Accenture’s market cap is twice that of all the advertising holding companies combined. Brim-DeForest said: “it can be challenging for legacy holding companies to move from analog to digital and that they should recognize the importance of ad tech, not as an enabler but its own pillar.” Sorrell concurred. “For us, I continue to be of the view that an alignment, ultimately, with the tech end of the spectrum is the smart move for clients and for ourselves,” he said. Ultimately, he wants to “leverage up” technology to encompass 25% of the business, with data at 25% and content at 50%.

– Q&A –

Olivia Morley, senior agencies reporter, Adweek

There have been two big themes in the industry: the first is toward consolidation, with agencies like WPP merging with sister agencies, and the second is with marketers consolidating their ad spend with a single partner. All of this seems like an industry-wide quest for simplicity. Tell us about lessons learned over time, like how are you approaching the strategy in a different environment?

Sorrell said that holding companies have created verticals but they aren’t really talking to one another. “I don’t buy simplification. The reality is, you may pitch together to win something, but the moment you win it, there’s a mad scramble to accumulate revenue, either for ego reasons or for practical financial reasons, bonuses and things, incentives. There’s less unification. There’s more overhead, certainly at the center, but less unification on the client side. In a 24/7, always-on world, clients want agility, to take back control and have access to first-party data. To be fair it’s not easy. We’re trying to do it on a smaller scale and it’s not easy to do,” he said.

When you bring in a merger into the fold, what is the process for integrating them and making them part of Media.Monks?

Sorrell said: “We get started from the get-go. As soon as they’ve signed an LOI [letter of intent], we work through questions such as what systems do they use? How do they develop a client relationship? And we get to mapping it out. When you start a business in a garage or basement, you become attached. You chose a name for a reason. The founder is attached to the brand, and the brand means a lot to the people and clients.”

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