WPP: breaking up world’s top advertising group could net £22bn

Sir Martin Sorrell’s resignation has raised the question of whether his successor will be able to stop a breakup of the world’s largest advertising group. Some analysts believe that there is more value in breaking up the sprawling empire – WPP employs more than 200,000 staff in 400 separate ad businesses in more than 3,000 offices in 112 countries – particularly as its stock market value has plummeted more than a third in the past year.

WPP reports its operations in four main business groupings:

1. Advertising and media buying (estimated sale value: £11bn-plus) The largest is advertising and media investment management – essentially the agencies that make ads and those that buy the ad space they appear in – which is the jewel in Sorrell’s crown. AMIM made £1.1bn in profit last year (almost 50% of WPP’s total of £2.3bn), accounts for 46% of revenues and boasts the best margin of 19%.

2. Public relations and public affairs (estimated sale value: £1.4bn) The least profitable of WPP’s units, accounting for just 8% (£183m) of the total operating profit and 7.7% of revenues. Companies within this division include Cohn & Wolfe and Burson Marsteller (which are merging globally), Hill & Knowlton, Finsbury, Buchanan, Clarion and Ogilvy PR.

3. Market research (estimated sale value: £3.5bn) The second-smallest profit centre for WPP, which officially calls this division data investment management, contributes 15% of total profits (£350m) and 18.5% of revenues for the group. WPP is already mulling a potential sale of the division.

4. Branding, healthcare and specialist (estimated sale value: £8bn to £10bn) The division has some attractive assets due to the profitability of areas such as healthcare. It is also home to a number of WPP’s valuable digital and interactive businesses. It accounts for 27.5% of profits (£625m) and 28% of total revenues. Digital advertising businesses include Wunderman, VML and AKQA, which has clients including Nike and Volvo. Branding agencies include Fitch and Coley Porter Bell. Healthcare communications agencies include GCI, Sudler & Hennessey and Common Health. Clients include AstraZeneca, Sanofi, Colgate, GlaxoSmithKline and Kimberley Clark.

WPP also has what anlaysts have called a “hidden treasure trove” of assets that are not part of its core business lines but could be worth as much as £6bn.

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