The deal transforms the global agency line-up, reducing the number of worldwide networks from seven to six and consolidating the power of the big players even further.
It will also give Sorrell control of the largest media agency in the UK, MediaCom – which will, in turn, give WPP as a group control of more than £1.4bn of business.
And he sent a message to staff at the company yesterday that said, in effect: you’re already great, but, with me behind you, you can be even more powerful.
WPP defeated old rival Havas and US private equity firm Hellman and Friedman in the battle for Grey, agreeing to pay more than $1,000 a share.
It was higher than the price most analysts had predicted but Sorrell jumped at the chance to buy a company he has long admired and, at the same time, deliver another bitter blow to French rival Havas.
Although Alain de Pouzilhac, Havas chairman and chief executive, tried to put on a brave face yesterday – claiming it decided to pull out of the bidding because the price was too high – it is the third victory over French companies in recent years by Sorrell, the king of the takeover battle.
WPP beat Havas to Tempus in 2001 and last year triumphed against Havas and Publicis in the battle for Cordiant.
The latest deal is a significant step toward the global consolidation endgame in which size means everything.
Havas is now widely seen as being out on a limb and, alongside Aegis, is in danger of being left trailing in the wake of WPP and fellow network giants Omnicom, Interpublic and Publicis.
A jubilant Sorrell yesterday spoke of his delight at gaining a grip over Grey clients, which include the biggest advertiser of them all, Procter and Gamble.
“It gives us access to a number of new clients and will reenforce a number of big existing relationships we already have,” he said.
Sorrell said WPP would look at unleashing pooled buying operation Group M and global marketing set-up Kantar on behalf of MediaCom’s clients.
He told Media Week: “MediaCom is already a wonderful business.
We don’t need to come in and change it. [Chief executive] Steve Allan has done a tremendous job.
“The only thing MediaCom needs to do is to look at Group M and WPP and see where we might be able to leverage those resources.”
Sorrell said it would be up to MediaCom bosses to decide if its future lay aligned with his new international network, Maxus – set up earlier this year – which will increase speculation that MediaCom could become lead agency in the network, which, as yet, has no UK operation.
The Grey deal will pose major client conflict issues, with WPP’s relationship with the second biggest global advertiser, Unilever, and how it will handle this alongside P&G, just one example.
“The benefits of combined leverage are many, many times offset by the difficulty of handling really sensitive client conflicts,” claimed Steve King, global chief executive of ZenithOptimedia.
“They have some really strong conflict business. WPP has Ford and Unilever and Grey has VW and P&G. I think the integration of Grey into WPP is going to be very difficult.”
Sorrell hit back claiming that the deal would be a good one even if MediaCom stayed as a standalone operation, adding: “People in glass houses shouldn’t through stones.”
Only the brave would bet against Sorrell being able to find a way around the client conflict issue and, although Allan claimed yesterday was “just like any other Monday morning”, he must be looking forward to having WPP’s extra firepower added to an already all-conquering agency that counts Deutsche Telecom, GlaxoSmithKline and Royal Bank of Scotland among its clients.
“Nothing per se changes for MediaCom here in the UK,” Allan told Media Week. “I don’t know if there will be client conflicts.”
“I think it’s easy to look inside any groups and find client conflicts.
I think the important thing for us is to reassure any clients that have those concerns that we’ll continue to service and look after their business and do only what’s right and best for them.
“What MediaCom has to do is take any advantages that it can from an alliance and deal of this kind, and if that includes growing its geographical reach and having access to even more resources, then that can only be a good thing.”
WPP says it has identified “synergies” that will bring cost savings of at least £11m from the deal and would look at combining IT and property infrastructure within the merged business.
During yesterday’s trading, WPP saw its stock soar from an opening price of £5.14 to £5.32 at one point, but the stock settled at £5.08 at close, down 1.2%.
Sir Martin Sorrell’s media empire
Nielsen billings: £610.9m
Declared billings: 669.5m
Key clients include: P&G, GlaxoSmithKline, Deutsche Telecom, Sky.
Nielsen Billings: £556.7m
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Chairman: Rob Norman
Nielsen billings: £198.6m
Declared billings: £326.5m
Key clients include:
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Joint managing directors: Tim Irwin/James Jennings
Nielsen billings: £59.1m
Key clients include: DaimlerChrysler UK.