For years ad agency Rediffussion’s Arun Nanda refused to sell out to WPP’s Martin Sorrell. Now Sorrell’s patience appears to have run out
If you’ve seen The Godfather, you know who Moe Greene is. For the uninitiated, he’s the man who plays a significant role in turning Las Vegas into the gambling hub of America. In doing that, he opened the doors of the city to five of the most powerful criminal organisations in the world — one of which is headed by Michael Corleone, essayed in the film by an intense Al Pacino.
The young Corleone doesn’t quite like how Greene treats his older brother. So, in a dramatic sequence of events, he asks Moe Greene to sell out from the Las Vegas casino he runs. A furious Greene retorts: “No, I buy you out, you don’t buy me out.” An equally furious Michael keeps quiet, but later orders Greene be assassinated in what eventually turned out to be among the more famous scenes in the film.
“Think of Arun Nanda as the Moe Greene of Indian advertising,” says a senior executive in the business who worked briefly with him five years ago. Cruel as it may sound, fact is, the metaphor feels appropriate. Since 2005, Sir Martin Sorrell, the 65-year-old CEO of WPP, the world’s largest communications conglomerate, has been trying his best to increase his stake in Nanda’s Rediffusion from the 26.7 percent he already holds.
Now, Sorrell is the kind of man who ruthlessly co-opts or competes with every trend, technology or competitor that stands in the way of his dream. In the late Eighties, he kicked off WPP’s expansion aggressively through a series of acquisitions beginning with JWT and Ogilvy. It’s taken him 25 years to get this far, turning a British company called Wire and Plastic Products that made wire shopping baskets into a communications company.
Sorrell’s reputation to spot trends years ahead of competition is the stuff legends are made of. He knows home grown Indian entrepreneurs have built enough muscle to spend as much on advertising as their counterparts elsewhere. So, while many grew their brands with domestic agencies like Rediffusion and Mudra, it is inevitable their spending powers will attract attention from global agencies and arch rivals like Publicis and IPG. Coupled with the formal approach and international reach of his agencies, Sorrell knows he can sew India up well before it evolves completely. The hitch? Arun Nanda.
“Not now, not ever,” Nanda famously said in 2007, when it came to selling any of the 60 percent stake he holds in Rediffusion Y&R with co-founder Ajit Balakrishnan, to Sorrell’s WPP. At 67, Diwan Arun Nanda, a gold medallist from IIM Ahmedabad, is impeccably dressed, alert and smooth of manner. The agency he presides over is one of the oldest (he started it in 1973) and one of the last, large independent advertising agencies in the country. There is a school of thought that believes Nanda didn’t sell out to Sorrell because he expected a valuation of Rs. 500 crore for his firm — a line Nanda rejects flatly.
The reason Nanda felt confident enough to resist WPP’s might was his theory that many Indian businesses would grow to a scale that would allow agencies like his to reduce their dependence on multinational clients. “Seventy five percent of our revenue has always been from domestic clients who do not have international affiliations with their international partners,” says Nanda.
The frosty relationships that exist between the two colourful men are fascinating. In 2007 for instance, Bates, a WPP arm, tried to take over Sercon, an Indian marketing services firm. This was around the time Nanda and former cricketer Ravi Shastri had floated Showdiff in the same space. For 18 months, Bates could not complete the acquisition because Nanda and Shastri invoked the provisions of Press Note 1, a government regulation, that says foreign investors with joint ventures in the country need a no-objection certificate from their Indian partners to set up independent ventures in the same field.
“I still hold true to the ‘not now’ part,” he says. “But it’s difficult to say the same of ‘not ever’. I may die and go away, and who knows what somebody after me will decide?” You suspect there is sadness in his voice, resignation as well perhaps.
Last month, Rediffusion lost the Airtel account to JWT India and Colgate-Palmolive to Bates 141 — both agencies controlled by Sorrell’s WPP Group. Airtel was its largest account by revenue and was estimated to bring in more than half of everything that Rediffusion’s Delhi office earned. It generated annual advertising and marketing spends in the region of Rs. 400-600 crore. Both the accounts put together accounted for more than a quarter of the firm’s annual revenues.
“Colgate was Rediff’s backbone and Airtel the star in its galaxy. Obviously, these are huge losses and not the kinds you can shrug off,” says K.S. Chakravarthy, former creative head at Rediffusion and now the same with Draft FCB Ulka. “Nanda is the father of Brand Airtel,” he adds. “I was upset when I heard Airtel’s moved and I share his personal hurt.”
Airtel and WPP declined to talk to us for this story. Colvyn Harris, CEO, JWT India too refused to confirm if his agency had indeed won the Airtel account. Funny thing is, everybody in the industry knows what’s really happened. But few seem willing to admit the long arms of Sir Martin Sorrell pulled a few strings.
What Really Happened
“Airtel’s ambitions are sky high. At some point, therefore, they will ask themselves: Have we outgrown our agency?” says Chakravarthy. Until very recently though, nobody would have ever imagined things would come to such a pass between Rediffusion and Airtel. “Nanda had a good equation with Sunil Mittal. Preet Bedi [former president at the agency] had a good equation with Manoj Kohli, I had a good equation with other senior management including those in charge of marketing. We had multiple senior equations that were strong,” says Chakravarthy.
Over time though, Sunil Mittal opted out of operations, Manoj Kohli moved to handle international responsibilities and eventually relationships either disappeared or weren’t as strong. Meanwhile, Airtel was increasingly becoming a global company with operations in Sri Lanka, Bangladesh, and more recently Africa through the Zain acquisition.
A senior executive at one of WPP’s Indian companies privy to Sorrell’s agenda during his visits to the country says, for close to five years now, Sorrell and Nanda have met Sunil Mittal, the ambitious founder of Airtel, together. The script at these meetings, he says, has remained unchanged: Mittal insists WPP provide Airtel with global talent, global integration and better creatives. Sorrell says Mittal can have access to all WPP talent in the network. Meeting over, Sorrell asks Nanda to take a hike or pay exorbitantly for access to talent within the network. “Fireworks always followed,” he recalls. Sure, technically Rediffusion was part of WPP’s network because of the 26.7 percent stake Young & Rubicam, a WPP company, held in it. Normally that should have meant getting access to Y&R agencies and talent around the world depending on client needs. But that didn’t happen at Rediffusion because of the testy relationship between Nanda and Sorrell.
(This story appears in the 24 September, 2010 issue of Forbes India. To visit our Archives, click here.)