Ad agency denies claims it held takeover talks with Martin Sorrell rival

Sir Martin Sorrell’s digital ad company has been buffeted by wider economic malaise - Julian Simmonds

A London-based advertising agency has denied holding any takeover talks with Sir Martin Sorrell and insisted it has no interest in a deal.

MSQ Partners said it was “surprised” by a recent announcement from Sir Martin’s S4 Capital following a report by Sky News that claimed it had received an approach about a possible merger.

S4 said discussions were at a “very preliminary stage”, but insisted any deal would be structured as a takeover of MSQ by S4.

In an update to the stock exchange, MSQ said its board of directors had not been in any talks or considered any proposals.

The ad firm – which counts Diageo, Unilever and Vodafone among its clients – acknowledged that informal conversations may have taken place between its largest shareholder One Equity Partners (OEP) and S4.

But it said: “For the avoidance of doubt, neither OEP nor MSQ intend to pursue further discussions regarding the rumoured transaction.”

The company added: “MSQ remains focused on and confident in its primarily organic growth strategy, which has delivered consistent revenue and ebitda [earnings before interest, taxes, depreciation and amortisation] growth over a 15-year period and two of the most successful private equity exits in the marcomms [marketing communications] sector over recent years.”

The knock-back will deal an embarrassing blow to Sir Martin, who is looking to revive his struggling ad firm.

The 80-year-old tycoon oversaw a period of rapid growth at S4, which he founded following his acrimonious departure from WPP.

But the digital ad company has been buffeted by wider economic malaise as brands cut back spending. Its exposure to major tech clients such as Google and Amazon has left it particularly vulnerable to the slowdown.

S4 has also been hit by accounting blunders that forced it to delay its financial results twice, while it has issued a string of profit warnings in recent years after failing to meet its own lofty revenue targets.

Shares in the London-listed company have collapsed by more than 90pc with its market value now standing at roughly £135m, down from a peak of £5bn in 2021.

S4 has embarked on a heavy programme of cost-cutting, including slashing hundreds of roles. The company posted a loss of £307m last year after taking a £280m write-down owing to tough trading conditions.

Its struggles come amid deep-seated challenges for traditional advertising companies as tech rivals gain a stranglehold over the online market and as artificial intelligence (AI) threatens to upend their business models.

This has fuelled speculation of a wave of consolidation across the industry.

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Omnicom and Interpublic have agreed a $30bn (£22bn) merger that will create the world’s largest advertising agency, while WPP has been linked to a potential tie-up with Accenture.

S4 Capital was contacted for comment.

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