Wrestling with a dog from Hell

Can Cerberus still bite back, or has WPP Group’s Sir Martin Sorrell, like a latter-day Hercules, successfully wrestled Maurice Lévy’s three-headed monster from Hell to the ground? Certainly he has wrestled his old foe Lévy to the ground.

The battle for Cordiant has taken on mythic proportions as giant egos strutted the centre stage in the denouement of a unique and colourful takeover drama. Appropriately enough, only portents can shed light on the eventual outcome. We may infer from Levy hoisting the white flag that the Publicis/Cerberus axis has been finessed by WPP’s latest offer. The disclosure that WPP had entered into ‘exclusive and advanced talks’ with Cordiant and its bankers – who handle the 70 per cent of Cordiant debt not owned by Cerberus – also lends weight to the idea that Sorrell is winning with a £255m bid. But it isn’t over by a long chalk. Even if Sorrell sees Cerberus off he must still get the WPP bid past Cordiant’s shareholders. Meltdown, in the form of receivership, remains a slim possibility for Cordiant.

Where we are on firmer ground is in the lessons that can be drawn from this sorry saga, which reflects creditably on almost no one. What has the role of Cordiant clients been in the interminable fray? As exclusive providers of Cordiant revenues, you might naively imagine they were quite important stakeholders with a say in the outcome. Whereas, at best, they have – like British American Tobacco’s Dr Jimmi Rembiszewski – been shadowy figures on the periphery, signalling their discontent with certain outcomes; mostly kept in the dark by the protagonists in the bid battle; and, at worst, emerged looking like Publicis’s cat’s-paw: as Allied Domecq’s Kim Manley did when he put Cordiant on notice – an event that destroyed its independence.

Next, the shareholders. They have been made to look particularly silly, especially Active Value which has garnered 17 per cent of what are virtually worthless shares. But not only are shareholders out of pocket, they have also been marginalised. In this unusual bid battle, it has been the increasingly irascible lenders (hedge fund Cerberus and the banks led by HSBC) not the shareholders which have been critical, because they can put Cordiant into receivership by cutting the lifeline to its £262m debt. So what? Here’s what. The Cordiant affair has estranged the City, which believes it has been dealt with shabbily. Fewer equity investors will look favourably in the future on marketing services and possibly media stocks, while poorer credit ratings will enable banks and other lenders to drive a still harder bargain.

Some of the blame for this situation, of course, attaches to Cordiant’s senior management. Its current line-up could be charged with incompetence and greed, but it is not to be blamed for the origins of the crisis. We must ask how former chief executive Michael Bungey and chairman Charles Scot allowed this debt mountain to accumulate in the first place. Were they simply pawns in the hands of their management consultants, egged on to make more and more ill-judged acquisitions at the top of the bull market? And what did shareholders – who have shown a lamentable ignorance of the marketing services business – do to stop them?

Mythic indeed: hubris followed by nemesis.

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