±±¾©Èü³µpk10

All eyes on Royal Bank of Scotland
Arguably the UK deal of the last decade or so was Royal Bank of Scotland's takeover of National Westminster Bank, creating a UK giant and now one of the biggest banks in the world.

The person who released the value in the deal was Fred "The Shred" Goodwin (now RBS CEO Sir Fred Goodwin) who found costs to cut that others had missed completely.

Fred has since expanded the business internationally, most notably with last year’s consortium takeover of Dutch giant ABN Amro, for a chunky £47bn.

RBS, which gazumped Barclays for ABN just as it had Bank of Scotland for Nat West, continued with its bid even while stock markets were collapsing and credit tightening thanks to the sub-prime crisis.

Some unkind commentators have remarked that it could have bought Merrill Lynch, JP Morgan and a couple of others for the same money at the tail end of last year. That is, they feel Fred overpaid.

Now there are fears that RBS will need to boost its capital ratio (the proportion of its own money to its loan book) if it has to announce big sub-prime write-offs when it announces its 2007 profits on Thursday.

But Fred didn't get where he is by blinking first.

A rights issue, the most obvious way of raising more capital, would result in a City chorus calling for Fred's head (RBS shares are already down 40% or so in a year and a rights issues would depress them further).

So RBS is far more likely to flog off a few of the big assets it has acquired over the past few years, like Angel Trains and Condor Ferries.

A few weeks ago it looked as though it might be adding Liverpool Football Club to this eclectic list, because it lent Tom Hicks and George Gillett the money to buy it. However, they've since re-financed.

But, just as football managers need to be lucky, embattled CEOs need circumstances in their favour too.

And there are signs that the markets are recovering a bit, in the UK anyway. The financial sector has brought them down but Barclays and Lloyds TSB produced decent figures last week and Alliance & Leicester, which took a biggish hit on sub-prime, didn't collapse and will probably be taken over anyway. Northern Rock is out of the way (for better or worse) and RBS, unless it's just talking a good game, could seal the recovery.

And Fred's big bet on ABN Amro won't look so daft after all.

The spread betting shops are expecting the FTSE 100 to rise back above 6,000 this week and the index duly set off north in early trading this morning.

Are we out of the woods?
Wily Wendelin makes another killing at Porsche.

We've written before here about how Porsche CEO Wendelin Wiedeking made (even) more money last year out of playing the markets than he did knocking out Cayennes and 911s.

In fact, he made so much that he now controls Volkswagen, Europe's biggest car manufacturer, without having to go to the trouble to make a full bid for the company.

Last week, with credit markets in disarray, Wendelin drew down a €10bn credit line just before it expired.

The deal was arranged back in 2007 when he probably thought he might need it to buy more VW shares (he didn't, he used loose change instead).

But let's say he's paying 5% interest on this note (rates were lower last year). He can just put it back on deposit with the banks lending to him at a minimum of 5.25% (the going rate at the moment) and make a tidy return by doing precisely nothing.

Who needs to make cars?

What next for WPP?
WPP is due to report its 2007 annual results on Friday, although judging by this weekend's reports there's precious little not to know.

Sales are expected to be £6bn with operating profits somewhere north of £900m, operating margins of 15% will be achieved and there’ll be a warm forecast for the rest of this year fuelled by the US Presidential elections (Sir Martin Sorrell must be hoping that Barack Obama and Hillary Clinton slug it out down to the wire) and the Beijing Olympics.

According to The Sunday Telegraph, which wrote a story including what may be the world record of references to "expected", Sir Martin may break with tradition and decline to offer a sales outlook for 2009, on the grounds that if he says it's challenging the shares will take a hammering, despite this year's good results.

Actually, he’s said it's going to be less good than 2008 a few times already (no US Prezzies, Euro 2008 or Olympics) but there's probably no point in rubbing salt in the wound in today's febrile markets.

But this is Sorrell's problem. WPP has become so vast that it's taken to be almost a commodity stock, one that just goes up and down with the ad market (and big events like the Olympics which, sadly, only happen every four years).

So despite much trumpeting of triumphs like the "exclusive" marketing services deal with Dell and winning AT&T's whopper media account in the US, the very size and diversity of the company means that these only have a marginal impact on the group bottom line.

Sorrell was quicker off the mark than his rivals at Omnicom, Publicis and IPG to move into digital and invest heavily in emerging markets, particularly China.

But the core of the business still remains in the US and Europe, and in these regions its fortunes have been mixed.

In London, ±±¾©Èü³µpk10’s Nielsen-based figures show that his creative agencies (still the heartbeat of the company, to some of us anyway) are struggling, with JWT, Ogilvy and Grey all losing ground against their peers, with Y&R holding position.

In UK media buying, WPP's MediaCom, MindShare, Mediaedge and BJK&E are becoming increasingly dominant, with about 40% of the overall market booked through its Group M buying HQ. But with current competition regulations this is somewhere beyond saturation point. So there can't be much growth there, certainly not by acquisition.

So what are we to make of it all? Well, Sir Martin will no doubt pull another rabbit or two out of the hat on Friday, so let's not be presumptuous.

But some shareholders might be asking themselves where the next big injection of growth is coming from.

At the moment the global marcomms business is looking a bit like the oil business; a small handful of majors plus loads and loads of independents drilling for billings somewhere in the (metaphorical) wastes of Kazakhstan.

But is adspend quite such a commodity?

Stephen Foster is a former news editor of ±±¾©Èü³µpk10, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog and Politics of the Media for Brand Republic.