Machiavelli On Madison Avenue

By Barbara Rudolph

Just four years ago, the WPP Group was a sleepy English manufacturer of wire market baskets, filing trays and teapots. But since then the company has become one of the world's most powerful advertising firms. The WPP conglomerate has already swallowed up the New York City-based JWT Group, which included two leading U.S. agencies, J. Walter Thompson and Lord, Geller, Federico, Einstein. The architect of WPP's remarkable transformation is Martin Sorrell, 44, the most feared raider to set foot on Madison Avenue.

Last week Sorrell was on the attack again, singling out one of the oldest and most venerable names in U.S. advertising. In an unwelcome bid, the Briton proposed to pay $730 million to acquire the Ogilvy Group, which owns Ogilvy & Mather, the fifth largest U.S. advertising firm. The agency, which created the Man in the Hathaway Shirt campaign and today's sleek celebrity ads for American Express, has been independent since it was founded in 1948. If Sorrell were to succeed in taking over Ogilvy, his combined empire (estimated annual billings: $13.5 billion) would rank a close second to Britain's Saatchi & Saatchi, the world's largest ad firm. That may be more than a coincidence, for Sorrell was once the top financial officer for Saatchi. Rivals in the ad industry charge that his acquisition campaign is driven by a need to top his former employers.

The son of a London retailing executive, and a graduate of Cambridge University and Harvard Business School, Sorrell worked in posts ranging from sports promotion to food retailing before landing a job with the Saatchis in 1977. He spent eight years helping manage that firm's headlong growth, then left to build his own empire. Sorrell and a partner paid $676,000 for a controlling share in WPP in 1985, then used the company as an acquisition vehicle; they have bought 39 marketing and advertising firms so far. His most stunning triumph was the 1987 purchase of the JWT Group, an American conglomerate seven times the size of WPP. The $566 million deal was the first hostile takeover in the U.S. ad industry. Under WPP's control, JWT's pretax profit margin has increased from a weak 5% of sales to a respectable 10%.

Sorrell's takeover of Lord, Geller, Federico, Einstein, which was part of the JWT purchase, has proved more troublesome. Nine months after the deal, co- founder Dick Lord and five top executives walked out and formed a rival firm that they staffed with their former colleagues. Today both sides are mired in a court battle over the takeover and defection. Says Lord: "Martin is a man of property. He believes that the ends justify the means. I don't."

Many investors are worried that the acquisition of Ogilvy would depress WPP's earnings, since the debt assumed to complete the deal could become a burden on the company. Sorrell argues that the two agencies would complement each other. While WPP's Thompson group is strong in Japan, Ogilvy has a firm hold on the European market.

Another concern is that agencies may be getting too big to manage. Fast- growing and profitable Saatchi & Saatchi stunned Wall Street two months ago with the news that for 1989 its earnings will decline for the first time in 19 years. Sorrell insists that he will encounter no such obstacles. But first he will have to win the fight for Ogilvy, which is likely to seek higher bidders. Among Sorrell's possible rivals for Ogilvy: Japan's Dentsu and the U.S. firms Interpublic and Young & Rubicam. Sorrell may not be the only ad mogul who still thinks that bigger is better.

With reporting by Richard Behar/New York and Nancy Seufert/London