M&A roundup: Martin Sorrell strikes again
An air of inevitability surrounded the decision by marketing research group Taylor Nelson Sofres (TNS) to accept a £1.2 bn ($1.98 bn) takeover offer from Sir Martin Sorrell’s WPP. Newspaper headlines variously described TNS’ ‘surrender’ or ‘capitulation’. Most reports pointed to a central role for Sorrell, the old master of advertising buyouts.
Sorrell took home the award for best IR by a CEO at this year’s IR Magazine UK Awards, held in June, where a mix of analysts and portfolio managers determines the results. One respondent praised Sorrell’s ability to ‘think like an entrepreneur’ despite being ‘CEO of one of the UK’s largest companies.’ Sorrell’s reputation certainly played its part in winning over the TNS shareholders.
‘With any investment or company, you look at the management, and Sorrell’s been there and done it,’ says Alex de Groote, an analyst at UK stockbroker Panmure Gordon. ‘The marketplace perception of him is positive, and he’s definitely a net positive for the investment case on that stock.’
TNS managed to hold out against Sorrell for six months, consistently urging its shareholders to reject the offer. The firm’s preferred move was a nil-premium merger with German group GFK, but this fell through in August due to funding problems. TNS eventually accepted WPP’s bid, though it still maintained that the offer undervalued the company.
‘In the end, it was quite pragmatic,’ comments de Groote. ‘The stock market was tumbling and the reality is that, if the deal had fallen through, the shares would have fallen by £1.’
Sorrell looks smart to choose this moment to cement his position in the market research space for two reasons. Firstly, the market turmoil means prices are cheap. Secondly, market research is relatively resilient to the overall fall in marketing spend afflicting the industry. If the deal is successful, WPP will bolt TNS on to its existing research division, Kantor, creating a serious rival to Nielsen, the world’s largest research firm.
Sorrell’s own investors would be pleased to see a larger portion of revenue coming from research in the coming years. ‘Market research has shown more resilience historically, mainly because it is cheap,’ explains de Groote. ‘Historically, the biggest part of a budget has gone on the cost of acquiring media, but increasingly these guys are willing to forsake some of that for market research. There is more of a proven link between market research before launching a product, and post-launch sales performance.’
Details correct at time of going to press.