WPP fears exodus of top clients in wake of Sir Martin Sorrell’s shock departure

WPP could lose top clients including Ford, Mars, Jaguar, Shell and HSBC in the wake of Sir Martin Sorrell’s sudden departure as chief executive.

City analysts were on Monday speculating that the ad giant will be broken up, with various arms put up for sale.

Though investors might welcome that in the long-term, in the short-term the risks to the company are huge, experts, including Goldman Sachs, said.

Analysts at Goldman warned investors that: “We see a potential risk of disruption to WPP’s operations in the near-term… especially at a critical time when WPP is renegotiating its relationship with its largest client, Ford.”

Rivals are likely to try to poach other accounts, with top advertisers likely to try squeezing WPP at a moment of weakness.

Shares lost nearly 4% in early trading, hitting Sorrell’s 1.5% stake in the company, but were later off just 1% at 1155p.

Numis described Sorrell’s Saturday night resignation over an investigation into alleged impropriety “a tragic end to a remarkable career”, but noted “any group without a chief executive is vulnerable to a bid approach”.

A sell-off of assets seems more likely — critics say WPP is simply too unwieldy in a digital age, especially without Sorrell to hold it together.

Deutsche Bank said: “We reiterate our preference for Publicis which has recently smoothly transitioned to a new chief executive and where we see opportunity to pick up new accounts, benefiting from disruption at WPP.”

Liberum told clients there is a “significant possibility” that WPP will sell its market research arm and perhaps its PR assets, which include Finsbury and Buchanan in London.

The broker doubted talk that Sorrell will set up a rival agency, noting his age, 73, and saying “WPP is his creation and he would not want to do anything that would be seen as damaging to the company”.

Sorrell could make another £20 million over the next five years from long-term share bonus awards, depending on company performance.

UBS warned of further profit risks as clients make “efficiency savings”. Large clients have pulled back on spending via traditional agencies.

Sorrell is replaced in the short-term by Mark Read, chief executive of WPP Digital, and Andrew Scott, chief operating officer for Europe.

Adland sources see Read as the most likely internal successor, given his closeness to clients.