With S4 approach, London’s MSQ Partners emerges as dark horse in the agency race

It’s a significant turn in S4’s twisting narrative. Though there’s no guarantee discussions will progress beyond the “very preliminary stage,” per the statement, the fact the company has publicly acknowledged the approach after staying silent over earlier bids from Stagwell and private equity group New Mountain Capital suggests it’s a serious prospect — and not an entirely unwelcome one.

MS who?

MSQ has operated under the radar of most ad industry observers. But beyond the glaring spotlight, it’s quietly transformed itself from an indebted underdog to a stalking horse.

Back in 2011, the firm was $28 million in debt and had ceased trading on the London AIM stock market after negotiations for emergency funds from Lloyds fell through. That year, chief executive Peter Reid and chairman Roger Parry led a management buyout of the business, then branded Media Square. 

Fast forward to the end of the decade, and the company was one of the first agency groups to be picked up by private equity money in a 2019 deal with LDC that valued it at $50.3 million.

MSQ came out of the pandemic a transformed business, acquiring agencies like MMT, Freemaven, MBA, Brave Spark, Elmwood, Be Heard and Agenda21 while gunning for the kinds of mid-sized clients left out of the sunshine by holding company leviathans. The strategy worked. By 2021, it boasted revenues of $132 million and had secured a foothold in the United States. 

In 2023, U.S.-based One Equity Partners — formerly the merchant banking arm of JPMorgan Chase — took a controlling stake in the group valued at $228.2 million (LDC retained its minority stake). The deal gave MSQ a brief to expand further across the pond and build what CEO Reid described as “a next-generation, international marketing group that’s fit for the digital age.”

It now counts 1,850 staffers across 14 different agencies including B2B outfit Stein, PR company Smarts, New York creative shop The Gate and performance agency 26. Clients include Diageo, Lego and Con Edison.

Why would it merge with S4?

At first glance, MSQ and S4 are very different entities. Since it began its current phase of expansion six years ago, MSQ’s largely held off integrating the agencies it’s acquired, or from mucking about with their names and logos. It’s even launched new agencies, such as the sports-dedicated MSQ Sport + Entertainment shop in 2024.

It’s a holding company that holds — an idea increasingly out of vogue among the industry’s biggest players, most of whom are moving or attempting to move on towards an “operating model” philosophy. It also lacks the muscle of S4, which counts almost three times as many employees. “They would benefit from scale,” said Michael Seidler, founder and CEO of Madison Alley, an M&A consultancy that has advised on deals involving both S4 and MSQ in the past.

This deal could be a canny way for MSQ to attain that scale; given S4’s recent share price , Seidler noted, the company “is arguably highly undervalued.”

S4 and Monks have been pioneers of that operating model concept. In 2021, the firm underwent a radical shift that subsumed the market identities of its agencies into the Media.Monks brand Sorrell acquired back in 2018. Last year, it even dropped the ‘Media’ part.

Under the hood, however, there are interesting parallels. MSQ’s acquisition strategy has often fished in the same ponds that S4 did, prior to the 2022 accounting fiasco that stalled S4’s expansion drive. The company recently added connected commerce agency Precious Media, and AI and data firm Wooshi, to its production arm M3 — a move into a competitive theater for marketing services groups like Brandtech, Dentsu, WPP and Monks. 

And there are other echoes worth noting. MSQ’s co-founder Parry was employed as Charles and Maurice Saatchi’s personal assistant during Sorrell’s reputation-minting time with the pair. And both companies are headquartered in London, with MSQ’s Covent Garden base located a stone’s throw from S4’s lair in St James’s.

Minor points of similarity, but ones that might translate to a smooth cultural fit in the eyes of S4’s forceful owner. 

Sorrell’s judgement continues to be one of the main driving forces in S4’s saga. “At the end of the day, he’s the one that decides when and whether to sell and for how much. His legacy matters a lot,” said Seidler.

Despite S4’s performance on the stock market (it was recently trading at a fraction of its 2022 value), yesterday’s statement suggested that a deal “if agreed,” would see S4 take over MSQ, rather than the other way around.

S4 has favored mergers, rather than acquisitions, in the past. It’s a strategy that enabled rapid growth in its first years, but which also left it open to executive infighting as the owners who sold in exchange for stock saw that value drop steadily.

Still, a reverse merger would enable MSQ and its backers to benefit from the advantages of public listing while sparing themselves the trouble of a noisy initial public offering. And it could offer Sorrell, the architect of S4 and WPP, a life preserver in the form of one more business page-busting deal.