MSQ Companions has emerged as a possible suitor for Sir Martin Sorrell’s besieged S4 Capital.
The London-based company group has begun negotiating to merge with the Monks proprietor, per an announcement issued to the inventory market by Sorrell on Monday following a Sky Information report printed over the weekend.
It’s a big flip in S4’s twisting narrative. Although there’s no assure discussions will progress past the “very preliminary stage,” per the assertion, the very fact the corporate has publicly acknowledged the method after staying silent over earlier bids from Stagwell and personal fairness group New Mountain Capital suggests it’s a critical prospect — and never a wholly unwelcome one.
MS who?
MSQ has operated below the radar of most advert trade observers. However past the obvious highlight, it’s quietly reworked itself from an indebted underdog to a stalking horse.
Again in 2011, the agency was $28 million in debt and had ceased buying and selling on the London AIM inventory market after negotiations for emergency funds from Lloyds fell by. That yr, chief govt Peter Reid and chairman Roger Parry led a administration buyout of the enterprise, then branded Media Sq..
Quick ahead to the tip of the last decade, and the corporate was one of many first company teams to be picked up by personal fairness cash in a 2019 take care of LDC that valued it at $50.3 million.
MSQ got here out of the pandemic a reworked enterprise, buying companies like MMT, Freemaven, MBA, Courageous Spark, Elmwood, Be Heard and Agenda21 whereas gunning for the sorts of mid-sized purchasers ignored of the sunshine by holding firm leviathans. The technique labored. By 2021, it boasted revenues of $132 million and had secured a foothold in america.
In 2023, U.S.-based One Fairness Companions — previously the service provider banking arm of JPMorgan Chase — took a controlling stake within the group valued at $228.2 million (LDC retained its minority stake). The deal gave MSQ a quick to increase additional throughout the pond and construct what CEO Reid described as “a next-generation, worldwide advertising and marketing group that’s match for the digital age.”
It now counts 1,850 staffers throughout 14 totally different companies together with B2B outfit Stein, PR firm Smarts, New York inventive store The Gate and efficiency company 26. Purchasers embody Diageo, Lego and Con Edison.
Why wouldn’t it merge with S4?
At first look, MSQ and S4 are very totally different entities. Because it started its present part of growth six years in the past, MSQ’s largely held off integrating the companies it’s acquired, or from mucking about with their names and logos. It’s even launched new companies, such because the sports-dedicated MSQ Sport + Leisure store in 2024.
It’s a holding firm that holds — an concept more and more out of vogue among the many trade’s greatest gamers, most of whom are transferring or making an attempt to maneuver on in the direction of an “working mannequin” philosophy. It additionally lacks the muscle of S4, which counts virtually thrice as many staff. “They might profit from scale,” stated Michael Seidler, founder and CEO of Madison Alley, an M&A consultancy that has suggested on offers involving each S4 and MSQ up to now.
This deal could possibly be a canny manner for MSQ to realize that scale; given S4’s current share value , Seidler famous, the corporate “is arguably extremely undervalued.”
S4 and Monks have been pioneers of that working mannequin idea. In 2021, the agency underwent a radical shift that subsumed the market identities of its companies into the Media.Monks model Sorrell acquired again in 2018. Final yr, it even dropped the ‘Media’ half.
Below the hood, nonetheless, there are attention-grabbing parallels. MSQ’s acquisition technique has usually fished in the identical ponds that S4 did, previous to the 2022 accounting fiasco that stalled S4’s growth drive. The corporate not too long ago added related commerce company Valuable Media, and AI and information agency Wooshi, to its manufacturing arm M3 — a transfer right into a aggressive theater for advertising and marketing providers teams like Brandtech, Dentsu, WPP and Monks.
And there are different echoes price noting. MSQ’s co-founder Parry was employed as Charles and Maurice Saatchi’s private assistant throughout Sorrell’s reputation-minting time with the pair. And each firms are headquartered in London, with MSQ’s Covent Backyard base situated a stone’s throw from S4’s lair in St James’s.
Minor factors of similarity, however ones that may translate to a clean cultural match within the eyes of S4’s forceful proprietor.
Sorrell’s judgement continues to be one of many foremost driving forces in S4’s saga. “On the finish of the day, he’s the one which decides when and whether or not to promote and for a way a lot. His legacy issues loads,” stated Seidler.
Regardless of S4’s efficiency on the inventory market (it was not too long ago buying and selling at a fraction of its 2022 worth), yesterday’s assertion advised {that a} deal “if agreed,” would see S4 take over MSQ, reasonably than the opposite manner round.
S4 has favored mergers, reasonably than acquisitions, up to now. It’s a technique that enabled speedy development in its first years, however which additionally left it open to govt infighting because the homeowners who offered in alternate for inventory noticed that worth drop steadily.
Nonetheless, a reverse merger would allow MSQ and its backers to profit from some great benefits of public itemizing whereas sparing themselves the difficulty of a loud preliminary public providing. And it might provide Sorrell, the architect of S4 and WPP, a life preserver within the type of another enterprise page-busting deal.
