Visitors to the London office of the Bates Worldwide chairman in the early 1990s found schadenfreude irresistible when they stared at the painting behind his desk. It showed a man painting a floor, unaware that he is backing himself into a wall with no visible means of exit. It proved spookily prophetic.
Like the hapless painter, Cordiant too found itself up against a wall with nowhere to go and anxiously awaiting rescue. Today, Cordiant’s story offers some salutary lessons about the dangers of spending recklessly in order to keep abreast of the big players in a rapidly consolidating communications world.
The story begins in 1997 when Cordiant, whose principal asset was Bates Worldwide, was de-merged from Saatchi & Saatchi, then clawing itself back to profitability after the fallout from the brothers’ dramatic exit.
Bungey, Cordiant’s boss, had once run an agency teetering on the brink of bankruptcy but was desperate to be seen as head of a big player. His critics, though, claim he struggled with the transition from account man to running an international business.
Faced with either selling Cordiant or rebuilding it, Bungey chose a voracious £700m acquisition programme. But with the ad sector boom at its height and worthwhile targets commanding premium prices, he found himself paying eye-watering amounts and drowning in debt.
By 2002, Bungey’s reputation as "Teflon man" – the result of his ability to escape nasty messes – seemed to have deserted him. Under shareholder pressure, he stepped aside. It was too late. By the following year, Cordiant’s share price had collapsed, paving the way for a takeover by WPP.
Things you need to know
- The 2000 takeover of the Lighthouse Group, which included Fitch and Financial Dynamics, for $540m is regarded as Bungey’s most reckless acquisition. By 2003, the value of such acquisitions had plunged by more than two-thirds.
- David Hearn, Bungey’s successor, tried to save Cordiant by disposing of its peripheral operations but major account losses sent its shares into freefall.
- Bungey exited Cordiant with £1.6m, including £750,000 for "loss of office".
- Looking back on what happened, Bungey has always maintained that if he got stung, so did many others. "Hindsight is a wonderful thing," he said later.