David Lowden is playing for high stakes. If he gets it right, the chief
executive of Taylor Nelson Sofres gets to run a company twice the size. If
it goes wrong, the 50-year-old loses his job and becomes a victim of Sir
Martin Sorrell's WPP.
He will know for certain in a matter of weeks, but for the moment all that Mr
Lowden can do is to justify to investors his proposed £2.2 billion merger
with GfK, of Germany. And wait for the hyperactive Sir Martin to make
another bid. Or possibly, just possibly, walk away.
His theory is that his job has been on the line since Taylor Nelson Sofres
(TNS), the market researcher, and GfK began to talk in November. “We went
into those discussions without knowing what the senior positions would be at
the end of the day,” Mr Lowden said, finding time to talk amid a frantic
schedule of investor meetings. He pointed out that the final decision had
been made by the chairmen of the respective companies - Donald Brydon, a
veteran City figure, at TNS, and Hajo Riesenbeck, of GfK, a serving McKinsey
partner.
The deal proposed was a merger of equals. TNS and GfK are similar in size,
posting annual profits of £83.2 million and £80.1million respectively. Mr
Lowden's survival was always going to be based on a carving-up of the posts.
He said: “I had discussions with Hajo Riesenbeck, their chairman, and their
non-executives, and Donald Brydon and Hajo came to the decision.” Mr Lowden,
a trained chartered accountant who had been with TNS since 1999, first as
finance director, then as chief executive, was named chief
executive-designate. Mr Riesenbeck will become chairman.
Yet will he last? Sir Martin has bid twice at below TNS's 257p, which values
it at £1.1 billion. The first bid landed in March, while TNS was talking
secretly to GfK. Sir Martin was held at bay after a short meeting at an
hotel near Euston station. “It came in the midst of those discussions. It
wasn't as interesting, but you couldn't expect me to tell him: 'I can't, I'm
busy, I'm talking to GfK.'”
It is not an unreasonable point. TNS and GfK fit reasonably well; they have
promised £76 million of synergies in three years. WPP can contribute the
smaller Kantar, its own market research unit, and, therefore, presumably,
slightly fewer synergies, although the noise from WPP is that the TNS-GfK
proposal cannot hit the 15 per cent profit margin target. Sir Martin is
unsure that the pair's strategy is realistic.
Mr Lowden sees Sir Martin as a spoiler. “First and foremost, he sees the logic
and, quite frankly, he doesn't like it. He'd be very pleased to see this
merger not succeed.” But there is a bit more to it than that. “This industry
has been consolidating. WPP has been looking for a merger partner for
Kantar. He looked at Synovate [the market research business owned by Aegis],
he's looked at a number of other assets. TNS looked difficult - he'd have to
pay a healthy premium.”
However, it is not enough to attack WPP. Mr Lowden took over TNS in January
2006 from Mike Kirkham when the company was running into trouble in the
United States after a difficult integration of NFO, bought in 2003, which
does not bode well for the GfK deal.
The problem with America, Mr Lowden said, “was that the company was under
pressure from new competitors, with lower prices” who were using
internet-based surveys rather than focus groups or visits to housewives in
Cleveland, Ohio. “The US was not responding fast enough,” he said.
“We've reshaped the business and it's now focusing on selling advisory
services.” So even though that issue has been repaired, a combined TNS-GfK
will still be only No3 in the world's largest economy.
As a pure public company, TNS can hardly stop a Sorrell bid (GfK is protected
because it is majority-owned by a trust, whose goal is the furtherance of
market research), but it can ask him to bid up.
Ask Mr Lowden whether Sir Martin would have to bid more than 300p - that is,
£1.3billion - and the answer from the TNS chief executive is “yes” (an
answer that I was told later should be ignored in case it caused problems
with the Takeover Panel). Sir Martin's last cash-and-shares bid is worth
slightly less than 240p, but Mr Lowden said: “What Sorrell has put on the
table does not even value TNS by itself.”
Even if Sir Martin comes in with a higher price - and, of course, his side
plays down the notion of a 300p bid - there are other risks for Mr Lowden.
The talk in Germany is that if TNS shareholders want some cash, rather than
the all-paper, nil-premium offer of the moment, then GfK would allow TNS to
gear up and pay back a special dividend to its investors before going into a
50-50 merger, as agreed. But the price for keeping the terms the same would
be more executive jobs for the Germans - that is to say, Mr Lowden would be
out. This, however, is not a subject discussed publicly.
Market research is growing healthily - 5 per cent so far this year - because
companies are obsessed with finding out whether their advertising is
working. Unlike advertising, the activity has been relatively resilient in
economic downturns.
Mr Lowden uses that as an opportunity to hit back at his foe. He said: “There
is talk of an advertising slowdown in 2009. Sir Martin is trying to move out
of advertising and into marketing services. His business is not performing
well and he wants to diversify.”
WPP, with organic growth of 5percent last year, might disagree about
performance, but not about diversification.
Why do TNS and GfK mesh well? The 500 people in the enlarged group who would
lose their jobs might not be so convinced, but the larger argument is the
opportunity to provide more services to clients.
While describing the two companies as “very complementary”, Mr Lowden offered
an example: “In the US we bought a company called Compete, which tracks
consumer behaviour on the internet, seeing what sites they visit and what
they do there. GfK, meanwhile, has a consumer panel that measures exact
purchase and buying decisions.”
Uniting the two means that the combined company could follow a consumer online
- watch them surf the BMW and Mercedes sites, say - and draw conclusions
about their choices.
As Mr Lowden ponders his future, he must wonder whether he could find a way of
finding out online what Sir Martin Sorrell is up to. With the right
technology, he might be able to anticipate whether the WPP boss is in a
buying mood. As it is, he will just have to wait and see whether he gets to
keep his chief executive's job.
David Lowden
Born August 16, 1957
Education BA Business Administration, University of Strathclyde; Member
of Institute of Chartered Accountants, Scotland
Career Appointed TNS chief executive in January 2006. Joined group and
appointed to board in 1999 as finance director and became chief operating
officer in 2003. Previously worked for a number of international companies,
including ACNielsen and Federal Express Corporation
Family Married, two sons
Other Interests Sport (rugby, golf, skiing, water skiing, scuba
diving), history, reading, wine tasting
The leader questioned
If you could change one thing in the financial and commercial environment,
what would it be?
Put decision-making and responsibility back into people’s hands by limiting
the use of electronic communication
Who is or was your mentor?
My father
Does money motivate you?
I’m Scottish. To a certain extent . . . but there are other things in life
What is the most important event to happen in your working life?
Being given the opportunity to develop and lead a global organisation
What does leadership mean to you?
Creating an inspiring vision and allowing people to develop and fulfil their
potential
Which business person do you most admire?
Frederick W. Smith, pictured, the founder of Federal Express . . . for his
vision and for creating a whole industry around the express delivery
business
How do you relax?
Spending time with my family and playing golf
