Sorrell exit could spell the end for WPP, analysts say
The news follows an investigation into allegations of personal misconduct by Sorrell, which WPP said has now concluded.
The holding company has appointed Mark Read, chief executive of Wunderman and WPP Digital, and Andrew Scott, WPP corporate development director and chief operating officer, WPP Europe, as joint chief operating officers.
WPP's chairman Roberto Quarta, meanwhile, will become executive chairman while the company seeks a new leader - a process Sorrell is set to assist with.
Speculation over who could succeed Sorrell should he stand down has been rife since the allegations emerged two weeks ago - with Read regarded as a favorite by many.
Alex de Groote, media analyst at Cenkos Securities, said that the question of who would succeed Sorrell at the helm was a "red herring," because shareholders want to break up the company. Its constituent parts, especially the health and digital divisions, are worth far more than WPP's share price, he added, which has fallen by more than 40% from its February 2017 peak.
If WPP did break up, it would be likely to trigger moves by shareholders in other holding companies, such as Omnicom Group, Interpublic Group, and Publicis Groupe, de Groote said.
He believes they will all be broken up within the next 12 to 18 months.
"Once WPP breaks up, the pressure on the other guys will be irresistible," he added.
However, de Groote predicted that if any of the major holding companies were to remain intact, it would be Publicis, because of its ongoing reorganization, recent leadership transition, and French business culture.
Another analyst agreed that a breakup of WPP was a plausible outcome, but warned that disentangling its various companies would be challenging. One industry leader said the process could become "extremely ugly."
Ian Whittaker, head of European media research at Liberum Capital, disagreed that a break-up of WPP was in the cards. He said instead that the simplification of its structure, under which several WPP brands have merged over the past year, would continue.
"The holding company model still makes sense," he added, arguing that it needed an evolution rather than a revolution.
WPP stated that the amounts involved in Sorrell's alleged misuse of company funds were "not material" to the company, leading one U.K. agency chief executive to question the board's intentions.
"It is difficult to see a future for WPP," the chief executive said. "Maybe that's [Sorrell's] master plan – none of us can see the company existing without him."
But while the chief executive agreed that some parts of the business would be attractive to buyers, he questioned who the likely purchasers of WPP's creative networks – J Walter Thompson, Ogilvy & Mather, Y&R, and Grey – might be.
He added that while de Groote's prediction that other holding companies could also be broken up was not out of the question, it was unlikely to happen quickly.
"I suspect that they might wait and see how WPP goes," he said.
This story first appeared on campaignlive.co.uk.