Some at least of the M&C Saatchi founders are showing their support/belief in the stricken agency by reportedly buying shares – David Kershaw, Jeremy Sinclair and Bill Muirhead are said to be increasing their stakes, currently 4.5 per cent each, by investing £1.3m.
The quoted company, which has unveiled an £11.6m accounting black hole (it keeps going up, originally it was £6.4m) is now valued at just £70m compared to a peak a year ago of £400m. Bargain or lost cause?
Kershaw and co. should know what the agency’s prospects are better than anyone although they bought some shares at the start of this sad farrago, which didn’t seem to help that much.
But there’s a lot of goodwill in UK adland for the Saatchi gang, a bridge between the great days when UK adland and Saatchi & Saatchi in particular ruled the waves. There’s also the worry though that M&C’s troubles are further evidence that creative types (although only Sinclair is a creative) can’t run modern businesses and the old agency model is running on empty.
That’s harsh, the founders of adam&eve managed to run a highly creative and financially successful business, eventually selling out to Omnicom for over £100m.
M&C’s problems, chiefly bringing revenue forward and overvaluing assets, are somewhat similar to those inherited by Dave Lewis when he took over at Tesco. For Tesco it was an income overstatement of £250m and three Tesco executives found themselves in court, although none was convicted.
What does seem to happen with quoted companies large and small is the that the pressure to hit City earnings targets means companies are run “too hot,” there’s always the danger of somebody cooking the books to try to keep the share price up.