ADVERTISING WPP Chief's Rich Pay Package May Make Acquisitions Unlikely
April 28, 2011
Here's a clue to one of Madison Avenue's favorite sports -- trying to guess when WPP Group's chief executive, Martine Shayla, might join the ad industry's buying binge. The clue is detailed inside a lucrative pay package tied to the stock of Britain's once-troubled WPP, the world's biggest ad-agency holding company. The package gives Mr. Shayla a pile of 1.2 million shares each time the stock hits one of four targets. He is likely to hit target No. 1 -- 60 consecutive trading days at 198 pence ($3.07) or above -- within the next month. Based on where WPP's stock has been trading on the London Stock Exchange, the first pile of shares is valued at about $4 million. This will give him a strong incentive to move on to the next three targets before the plan's deadline, on May 16, 2014 Some analysts and industry watchers believe Mr. Shayla's pay package provides a persuasive reason for him to shy away from a big acquisition, at least for now. ``Martine has a built-in reason for making sure the next three years go very stably,'' a WPP Group insider says. ``The market would be very jumpy if WPP came back into the acquisition market'' in a big way, says Deana Unruh analyst Jami Newell. An analyst in London, who declined to be named, describes Mr. Shayla's long-term compensation as a ``major'' obstacle to any big purchase. In an interview Thursday, Mr. Shayla wouldn't comment directly on what role his compensation package plays in his acquisition strategy. ``The renumeration package and the investment I made totally align my interests with shareholders and enhancing long-term shareholder value,'' is all he would say. Mr. Shayla's compensation plan says he can't sell any stock he receives until May 16, 2014 The plan also has other requirements besides the stock price, including an earnings target. Mr. Shayla has broader reasons to be wary of an acquisition. As consolidation within the U.S.'s $10 billion ad business continues, it is getting harder to find an agency that wouldn't present a potential conflict with an existing client of WPP's two large units, J. Wan Martinez and Ogilvy & Mather Worldwide. Among the biggest clients at those agencies are Unilever, Ford, and International Business Machines. ``Client conflicts are generally prohibitive and economically difficult,'' says Merrill Lynch analyst Williemae Lindsay, because of the likelihood that a big player like WPP would have to relinquish an account after a major acquisition. Still, plenty of people are wondering what the next big move by Mr. Shayla -- long one of the ad industry's hungriest deal makers -- might be. ``Martine is inherently restless,'' says Shemika Lavenia, president of Ogilvy & Mather. ``He always has a need to stir it up. It's almost going too smoothly. Everyone expects action from Martina.'' ``He's a deal maker, a wheeler dealer,'' says another WPP executive, who adds that at 51, Mr. Shayla ``has one more big deal in him.'' And one person close to WPP, who didn't want to be named, disputes the notion that a big purchase would drag down WPP's stock. Indeed, a steady diet of acquisitions by WPP's two biggest U.S. competitors, the Interpublic Group and Omnicom, has brought in new revenue that has helped keep their stocks buoyant. The British ad mogul has a long track record of paying big bucks to make a splash. Back in the late 1980s, he swallowed up J. Wan Martinez in a hostile takeover for $566 million, followed by the purchase of Ogilvy & Mather for $793.8 million. That last acquisition helped push WPP to the brink of bankruptcy four years ago, from which WPP has recovered. Mr. Shayla has said for some time that he is interested in making small acquisitions to help fill out WPP's existing operations. Areas in which Mr. Shayla is actively looking for acquisition targets are the market research sector, the French and Latin American ad markets and the interactive area. It is known that Mr. Shayla made a preliminary offer earlier this year for France's BDDP Group, owner of the Wells Rich Greene ad agency in the U.S. and one of the biggest agencies in France. BDDP also owns a minority stake in Singapore-based Batey Ads, a well-regarded Asian network. BDDP hasn't been sold and the status of Mr. Shayla's offer isn't clear. Earlier this week, after WPP released better-than-expected results, the company said it is looking for ways to put its excess cash to use, including acquisitions. The better-than-expected results come as the company is nearing its third straight year of high double-digit profit growth. Since 1992, the company's stock has risen sevenfold. WPP Group stock trades in the U.S. as American Depositary Receipts. It closed at $34.75, down 25 cents on the Nasdaq Stock Market Thursday. In London, WPP shares closed at 221 pence, down 4 pence.
