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Although it is still uncertain whether Cordiant will be acquired by WPP or get broken into its constituent parts and sold off to the highest bidder, it is now no longer a quoted company. For those few shareholders who have not already sold, there will be more excitement over the coming weeks, but, for the vast majority who have sold to WPP, Active Value or Syrian chess promoter Madame Ojjeh, the game is over.

For the past few months the Cordiant saga has provided the City with high-quality entertainment. It has had all the ingredients of an outstanding business saga, with great characters, twists and turns, and high stakes. However, the history of Cordiant also provides the thoughtful investor with some worthwhile reminders and pointers.

Cordiant was created out of the remnants of the Saatchi & Saatchi agency, which crashed in the recession of the early '90s. For most of its 10-year life, it has been a constituent of the London Stock Exchange mid-market and media indices. Its demise is a salutary reminder that, although these indices have shown considerable growth in value over the 10-year period, the same is not necessarily true of their members. Companies have life-cycles and the average life expectancy of companies is getting shorter.

The principal reason for Cordiant having such a short life was its debt-funded acquisition of Lighthouse shortly before the advertising recession. Although many investors thought that Cordiant had overpaid at the time, the possibility that the Lighthouse acquisition could threaten Cordiant's very existence was not considered seriously. For any investor old enough to remember what happened to Saatchi & Saatchi, this may have been a mistake.

Cordiant's viability as an independent company effectively came to an end when two key clients decided to take their business elsewhere. This was probably prompted by changes, or rumoured changes, in key relationship managers. In many professional services businesses, the goodwill that investors often credit to the company may, in reality, belong to individual executives.

It is essential that these individuals are sufficiently incentivised to act in the best interests of shareholders. When a company gets into a downward spiral, this can be exceedingly difficult to achieve.

One of the theoretical attractions to being a shareholder is that you have a vote. Through votes cast at general meetings of a company, the shareholders are supposed to be able to exert control through effecting changes to management.  However, once a company's trading position deteriorates to the point where it is in breach of its debt covenants, effective control begins to pass to the lenders.

At the point where a company can no longer meet its debt payment obligations, the lenders are very much in control and equity becomes valueless.

It is often the cash-flow covenant that triggers this process and it is the lack of cash to make payments to the lenders that marks its end. However, many investors pay little attention to cash flow, focusing instead on narrow measures of profit, such as EBITDA or earnings per share. In so doing, they miss the early warning signs of potential
terminal value decline.

The final lesson must be not to blame the executives, who are brought in to try to turn a bad situation around if things do not work out.

If investors are to attract quality managers to try to protect residual value and engineer a recovery from a desperate situation, they must remunerate them properly and have realistic expectations of their chances of success.

Investors have only themselves to blame if they delay replacing poor management until it is too late.