Saatchi & Saatchi: The Rise, Fall and Rebirth of an Icon

Saatchi & Saatchi: The Rise, Fall and Rebirth of an Icon

Amr Manaa        EMBADJ2016        

What led to the initial success of Saatchi? How did it manage to grow so well until 1988?

Saatchi brothers were creative and visionaries, the talented, wanted to make their brand as an asset by thinking big from its start with clear strategy to take Saatchi & Saatchi to public within 5 years, the company grew with constant creativity being profitable from day one. Saatchi focused on developing its brand and communicate with customers through art direction and first-rate creative copywriting, hiring patient, creative and committed stuff allows them to add high profile clients as IBM, Nestle, Sainsbury, BP and BA. Saatchi & Saatchi started to spend a lot of money on premises to keep up its appearance as a key part of branding development as a global agency with creative Excellency in order to pull the really big clients.

Saatchi & Saatchi started their expansion by applying acquisition programme by accessing stock UK market through reversing takeover of Garland Compton that has been restructured to include Saatchi & Saatchi advertising worldwide as subsidiary, from there they started acquiring marketing services and managent consulting to become much diversified that extended to more acquisition like Ted Bates the third largest agency in the world with $450m to put Saatchi & Saatchi on the top of ranking as the number-one agency worldwide.

Financial management was a key success with all these deals and fast growth though its financial director Martin Sorrell as the high P/E ratio allowed to implement acquisition model that was both breathtaking in its aggression and entirely of its time that contributes to earnings growth driving to rising share price which in turn allowed the Saatchi brothers to issue more equity to fund more acquisitions aggressively with incredible rate of one a month to turn in ten years from nothing to £100m turnover company to became £2 billion group spread over 57 countries with 10,000 employees

What were the reasons of Saatchi’s demise? What led to the problems? And what accounts for the pace of the problems coming up?

Saatchi started to demise after its great success due to both internal and external reasons that hardly affected its performance and structure both organizational and financial that mainly caused because being very big with no clear direction or time to carefully study acquisition deals with lack of management and financial control as well as facing tough competition from their former top managers, this can be explained as following:

• Poor management; loose definition of the company business as Saatchi brothers conceived themselves as service provider with no specific scope definition, manage the group like a private company for their own benefit rather than a public company that existed to benefit its shareholders, they also didn’t expect the disadvantages of acquiring companies and its negative impact on some main clients like P&G which its policy doesn’t allow working with agencies that serves competing clients.

• Inadequate financial control; despite the incredible growth, Saatchi & Saatchi have spent a lot of money on premises and overpriced some acquisition deals to grow rapidly regardless the massive expenses, also, buy acquiring many small companies they start generating money from their stakeholders to finance more acquisition with no proper management plans .

• Overtrading; Seeking high sales figures concerning more about revenue more than profit

• Acquisitions; Saatchi & Saatchi were aggressively acquiring companies every month to expand and diversify with no organizational restructuring or clear definition for each company and for integrated group.

• Organizational inertia and confusion; Internal confusion as some disapproved of Saatchi & Saatchi’s aggressively acquiring strategy. Some questioned whether globalization and diversification into consulting were the right way for Saatchi & Saatchi to go. Others even suggested that globalization was an academic fiction, or perhaps simply a rationalization for the brothers’ personal ambition.

External confusion as clients, analysts, and observers also had their views. Some simply did not believe in the idea of a large agency, regarding the extra size and services as adding little value or even reducing creativity.

• Competition, WPP, the creation of Martin Sorrell continued to go from strength to strength competing with Saatchi & Saatchi and the move of Murice that followed by Charles and three key figures while brothers started new company M&C Saatchi approaching Saatchi & Saatchi existing clients and get major client like BA that hits Saatchi & Saatchi very hard, wiping 7% off global revenues at a stroke, in addition, having company with similar name was confusing

What were Seelert’s priorities in turning the company around? Which were his main actions, and why do you think he chose the course of action he did?

Seelert tried to quickly to put the company on track by developing a the right strategy and stick with implementation plan, setting big target to be the world’s best creative communication resource and concerning mainly about creativity and communication with specified goal to achieving 10% margin in 3 years and work backward to discover the details of the solution, to achieve this he strategy was: