Martin Sorrell's S4 Capital has revealed it is in merger talks with a private equity-backed rival, writes Jessica Clark.
The proposal from MSQ Partners marks the latest upheaval for the advertising industry amid the rise of AI.
Shares in S4 Capital leapt 3.8pc, or 0.8p, to 22p yesterday after it confirmed there had been discussions.
A deal would see Sorrell's agency buy MSQ, which is backed by private equity firm One Equity Partners.
The advertising sector has been rocked by the rapid growth of AI technology that threatens to do much of the admen's work for them.
S4, which was founded by former WPP boss Sorrell in 2018, has seen its shares tank around 98pc from their September 2021 peak to give a market value of about £140m - a fraction of its previous worth.
The business has been hit by client spending cuts due to US President Donald Trump's tariff war and a shift towards AI-driven marketing.
The dominance of tech giants Facebook and Google in the advertising industry has also rocked the traditional agency model.
In June, S4 Capital slashed its revenue forecast. A spokesman for S4 said: “These discussions are at a very preliminary stage and there can be no certainty that a transaction will be forthcoming.
“The possible combination, if agreed, would be structured as an acquisition of MSQ by S4 Capital and not an offer under the Takeover Code for S4 Capital by MSQ.”
S4 is expected to remain listed in London with Sorrell, 80, at the helm if a merger goes ahead.
The tie-up with MSQ would give S4 Capital access to a broader client base spanning the finance, healthcare and consumer goods sectors.
MSQ has more than 250 clients, including Unilever, Haleon, P&G and Lego.
S4's clients include Google's parent company Alphabet, Amazon and Meta.
Russ Mould, investment director at AJ Bell, suggested that the confirmation of the merger talks involving S4 Capital could mean “a full stop on a buy-and-build venture which has struggled to gain traction after initially generating excitement”.
