Business Comment: Go-it alone Cordiant rediscovers an old truth

How Lord Saatchi must be smiling to himself - that is if he has time to in between trips to Conservative Party Central Office, where he is advising the Prime Minister on election strategy and advertising. With its demerger announcement yesterday, Cordiant, Maurice Saatchi's former company, has all but run up the white flag, in effect admitting that it is unequal to the task of regrouping and reinventing itself after the traumas of the last five years.

This is strongly denied by the present Cordiant chairman, Charlie Scott, who rightly points out that the group is achieving the targets it set itself at the time of its 1995 rights issue. None the less, it is hard to avoid the comparison with WPP, which after a period of vaulting ambition and hubris not dissimilar to that of the former Saatchi & Saatchi suffered the same near-nemesis. Unlike Lord Saatchi, however, its creator and guiding light, Martin Sorrell, managed to survive, if only by the skin of his teeth, and he has restored the advertising giant to rude health.

The same cannot be said of Cordiant, which has struggled to stay afloat since Lord Saatchi deserted ship ,taking some of the company's best talent with him. Now it seems to be throwing in the towel altogether, the attempt to find a cohesive approach and culture in effect abandoned for good.

Lord Saatchi may be able to take some satisfaction in what has happened, but there should in fact be no shame or criticism attached to what Cordiant is doing. This is the company's way of unburdening itself of its past, of finally drawing a line in the sand and putting its businesses on the right footing for the future.

Demergers most often take place in companies with starkly different businesses. It is unusual to see a company all of whose interests are in the same business splitting itself in two. But advertising is different, a people business made up of big egos and volatile temperaments encompassing a wide number of successful formulas, most of which don't mix terribly well.

In fact there are few advertising businesses organised as holding companies that manage to achieve a unified approach and culture. Certainly there is little value the holding company structure can add to the work its agencies are already doing on behalf of clients. In any case, Saatchi & Saatchi, Bates and Zenith always were very different sorts of company and they never lived happily together. Bates has found the association with Saatchi's positively restrictive, raising conflicts of interest that prevent it competing for an estimated 10 per cent of the world advertising market.

There is every reason to believe both Bates and Saatchi's will function better alone than together. But those who think it will also make them obvious takeover targets have perhaps forgotten the lessons of the late 1980s and early 1990s. The City may have forgiven Martin Sorrell for the spectacular loss of shareholder value he oversaw in that period, but you'd be hard-pressed to find anyone willing to support another bout of empire-building in the advertising industry as we approach the millennium. Advertising may be one of those businesses where to be small is to be beautiful.