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MDC Partners

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MDC Partners is a mid-sized North American marketing group, housing a broad portfolio of creative and diversified marketing agencies, now mainly headquartered in the US, but with a growing international network. Operating primarily as a venture capital investor, it has accumulated stakes in a collection of separately branded, often single-office agencies, several of which have gradually developed a limited international profile. MDC has become best known for its shareholdings in two highly admired American shops, Crispin Porter & Bogusky and 72andSunny, each of whom also has outposts in Europe. Other subsidiaries include Forsman & Bodenfors, Anomaly and fashion specialist Laird & Partners. A key addition in 2012 was the purchase of a minority stake in Detroit-based Doner. The main benefit MDC offers its partner agencies is the upfront payout for their shares. Beyond that, businesses are left with operational independence, and that includes the freedom not to work with each other to grow faster or more efficiently. Gradually, though, the group has begun to encourage synergies between its various subsidiaries, not least through the creation of a pooled central media buying agency, now known as Assembly. However, after several years of rapid growth, MDC ran into a succession of problems in the 2010s. An SEC investigation into expenses claims filed by founder Miles Nadal led to his abrupt departure in 2015; soon afterwards, the rapid growth curve began to stall, and in 2018 MDC finally launched a strategic review. That led to the effective takeover of the group by industry veteran Mark Penn, who became CEO and controlling shareholder in Spring 2019.


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Brands & Activities

MDC Partners has assembled an impressive collection of agencies. Some of these are among the most admired creative shops in the industry, but the portfolio has also housed a number of less starry additions. The group acts as a combination of business consultant and investment banker to its subsidiary businesses, who are guaranteed operational independence. MDC argues that it provides a vital counter-balance to the top-heavy, sometimes over-bureaucratic mega-groups such as Omnicom or WPP. Yet so far there has been comparatively little attempt to woo clients at parent level by offering cross-group services, and MDC's revenues remain small compared to the groups which it wishes to rival. Towards the end of 2009, the group began to introduce more of a groupwide sensibility by creating a supervisory creative committee at holding company level, overseeing work from all the group's agencies. This was initially led by Alex Bogusky of CPB, until his departure in 2010. It was eventually replaced in 2013 by MDC Partner Network, a central unit that aims to coordinate groupwide strategic resources. However at the same time, the group's previously meteoric growth streak began to slow alarmingly.

The group's investment portfolio has traditionally been divided into two loose groupings identified as strategic marketing services (SMS), comprising agencies which offer general above-the-line client-based services; customer relationship management services; and what it calls performance marketing services (PMS), which it describes as "consumer insights to satisfy the growing need for targetable, measurable solutions or cost effective means of driving return on marketing investment and growth for regional, national and global clients." In reality there is not a great deal of difference between the two groups, and several agencies previously classified as PMS are now grouped in the SMS portfolio.

The group is dominated by industry favourite Crispin Porter & Bogusky (CPB), though this was overtaken in revenues in 2015 by KBS. Two newer high profile additions to this portfolio are 72andSunny, acquired at the end of 2010, with offices in Los Angeles and Amsterdam; and New York/London shop Anomaly, in which MDC took a majority stake in early 2011. Later the same year, Laird & Partners joined the fold, along with healthcare agency Concentric Pharma.

The first purchase of 2012 was New York media agency RJ Palmer, filling a sizeable gap in MDC's portfolio for dedicated media agencies. It was followed by another US media independent TargetCast TCM, whose CEO Steve Perella became president of a newly created umbrella group Maxxcom Media Partners. In March 2014, Palmer and TargetCast were merged to create Assembly, and Maxxcom adopted the new name of MDC Media Partners. Also in 2014, the group acquired New York PR agency Hunter Public Relations, the Holmes Report's consumer agency of the year for 2014.

Other medium-sized units include US shops Colle & McEvoy and Vitro. Experiential marketer Team Enterprises was acquired in 2010. They are in turn backed up by smaller shops Hello Design, henderson bas kohn, luxury goods marketing consultancy HL Group, Mono, branding agency Redscout, and Yamamoto Moss MacKenzie. In 2018, the group acquired Instrument, a digital agency in Portland, Oregon.

Several other subsidiaries have been merged to strengthen the presence of the group's lead agencies. In 2010, for example, KBSP absorbed Atlanta's Fletcher Martin and Allard Johnson in Canada; and CPB took control of Canadian agency Zig. (The latter was split out again in 2012 because of client conflicts. It now operates as Union. The group sold its 20% holding in New York agency Cliff Freeman & Partners back to management in 2009 after it experienced a series of account losses. That agency subsequently closed. Another New York subsidiary, formerly Margeotes/Fertitta, was shuttered in 2007.

In 2017, AdAge estimated worldwide revenues of $170m for 72andSunny, $149m for Crispin Porter & Bogusky, $142m for Anomaly, $133m for KBS, $126m for Assembly and $106m for Doner. All other units were under $100m.

MDC's more specialised PMS portfolio is gradually being wound down. It was until recently led by CRM specialist Accent Marketing Services, the group's second largest unit by revenues. However that business was put up for sale in 2015 following poor performance. It was eventually transferred to rival StarTek for $16m. Other units include direct marketer TargetCom, sales promotions agency Source Marketing; corporate communications shop Bryan Mills Iradesso; and research company NorthStar.

In 2000, the group took a few tentative steps outside the US, acquiring a stake in British marketing services shop Interfocus. However that agency was badly affected by the economic downturn of 2001 and 2002. It restructured in 2004 under the new name Mr Smith, but was later sold to management.

Until recently, MDC was also involved in printing and production of security-sensitive products and services such as credit cards, scratch cards, lottery tickets and postage stamps. This division, which operates under the name Secure Products International, was sold to investment group HIG Capital in 2006.


MDC's revenues have continued to grow steadily, fed by a combination of acquisition and organic growth. Topline broke the $1bn level for the first time in 2012, with a 14% increase to $1.07bn. That percentage growth was well below the 37% reported in 2011 and 28% in 2010. The group claimed organic growth of 8.4%, around half the 16.6% reported for 2011. EBITDA improved to $118m, but the group continued to report net losses, which increased slightly to $85.4m in 2012.

The group has reported losses for eleven of the past twelve years, with a solitary small profit of $133,000 in 2008. Cumulative losses to-date are almost $530m. Its biggest cost is interest on its large debt pile, which was $741m by the end of 2015, plus almost another $217m in deferred considerations to former shareholders of acquired agencies. MDC spent almost $58m on interest during 2015. Despite this, the group is rated highly by many investors, not least because of its considerable exposure to digital.

Results for 2013, and especially for the final quarter, were weaker than expected, prompting some alarm among investors and a sharp fall in the group's share price. Revenues rose by just over 8% to $1.15bn, equivalent to 8.3% organic. However net loss rose significantly to $148.9m, as a result of sizeable stock-based compensation charges as well as debt redemptions earlier in the year.

Further growth in 2014 led to a 15% reported increase in revenues to $1.22bn. Despite signs during the period that the group might scrape its first ever $1m-plus full-year profit, multiple 4Q charges resulted in a final net loss of $24.1m. The largest charge was a $16m write-off against the planned disposal of Accent Marketing Services. A total of 81% of revenues were generated in the US and 12% in Canada.

There was no annual profit again in 2015, but the group cheered investors with a solid set of results after a challenging year, in which MDC's share price had plunged in the wake of the SEC investigation. Revenues came in at $1.33bn for the year, up 7.1% on an organic basis, including 7.2% in the final quarter. Despite Nadal's repayment of more than $20m of past remuneration, group net losses for 2015 widened to $37.4m, from $24m the year before. However, adjusted EBITDA excluding depreciation and other charges was up 10% to $198m.

A dramatic slowdown in growth during 2016 caused MDC's share price to plunge once more to its lowest levels since 2009. After a mostly grim first nine months, results for 4Q reflected stability if not a full-blown recovery. There was a welcome profit for the final quarter, but not enough to reverse the previous nine months' losses. Full year deficit rose to $47.9m. However that included a $49m non-cash impairment charge and a $33m charge for early redemption of some of the group's high-priced debt. Full year revenues of $1.39bn reflected organic growth of 2.3%. A strong final quarter (3.8% organic) lifted the overall average for the year. MDC isn't out of the woods just yet. It still had debt of almost $950m at the end of the year and owed $230m in deferred acquisition payments to the former shareholders of agencies it has acquired.

President Trump's tax reforms handed MDC Partners a record profit for 2017 of almost $236m. The group has only once before delivered a net profit, a paltry $133k in 2008. Even on an adjusted basis, without the $200m or so of exceptional items, MDC would still have delivered a best-ever surplus of almost $30m. Revenues hit a record high of $1.51bn. Organic growth for the quarter was 3.3%, with a big lift from Canada and international bolstering a weak US market. That was lower than the previous nine months, cutting the full year figure to 7.0%, but still put MDC at the top of the overall class. Net debt remains high at $901m.

MDC finally reported figures for 4Q and full year 2018. The final quarter was lacklustre, with an organic decrease of 0.3% (the same decline as Publicis reported). Full year revenues were $1.48bn with a net loss of $132.1m. The latter included an $80m charge for asset impairment.


Miles Nadal was the founder of MDC, and was until comparatively recently chairman & CEO and also the group's controlling shareholder. In May 2014, he sold part of his holding, reducing his stake from 18% to below 11%. That unexpected move caused a temporary crash in MDC's share price. The stock gradually recovered before suffering another crash in April 2015 following the disclosure that the group was under investigation by the SEC in connection with Nadal's extravagant expenses claims. As a result of this, Nadal finally resigned from the group and its board in July 2015, and agreed to pay back more than $20m in expenses and remuneration. In 2017, he also received a $5.5m personal fine from the SEC and was barred from serving as a director of a public company for five years.

Nadal was replaced as chairman & CEO by Scott Kauffman, a director of the group since 2006. However, Kauffman said in 2018 that he wishes to retire from that role; he stepped down at the end of that year, and was replaced on an interim basis by an executive committee of four. They were David Doft (CFO), Mitchell Gendel (general counsel), Stephanie Nerlich (EVP, partnership development & talent) and David Ross (EVP, strategy & corporate development). Mark Penn was finally confirmed as CEO of MDC Partners in March 2019, after his own marketing services group Stagwell acquired a $100m shareholding in MDC that will end up somewhere between 25% and 30% of equity. Following that deal, Doft and Gendel left the group and were replaced by Frank Lanuto and Jonathan Mirsky respectively. Seth Gardner was appointed as COO in May 2019.


In 1980, whizz-kid entrepreneur Miles Nadal, then just 22, set up Action Photographics, a small photo studio in Toronto. (As a teenager he'd cut his business teeth at summer camp, selling photos of fellow campers to their parents). As the 1980s recession cut into the city's marketing services companies, Nadal rapidly expanded the studio's operations into design and then sales promotion, and he changed the company's name to Marketing Design & Communications (MDC) Corporation in 1983. By mid-decade the company had several offices around Toronto, and Nadal chanced his luck at the end of 1986 by reversing into a shell company quoted on the Toronto Stock Exchange. He then went on a shopping spree, acquiring a series of Canadian printing, typesetting, graphic design and PR companies. By 1990, MDC had built up a portfolio of 10 businesses engaged in just about every area of corporate communications except advertising. He moved into that area as well in 1992, taking a stake in a small Canadian advertising agency.

During the early 1990s, the group changed direction slightly, following the acquisition of US-based printer Ashton-Potter. This company specialised in secure printing of postal stamps and checks, with major contracts from clients including the Canadian Postal Service. The group also acquired event, lottery and airline ticket printer Mercury Graphics. In 1994 it made its biggest and boldest purchase to-date, mounting a hostile takeover of Canada's largest direct mail business Regal Greetings & Gifts, for a final deal price of C$58m. By now, MDC had come to stand for Multi-Disciplined Communications, and there was a growing divergence between the extremely lucrative ticketing division and the portfolio of marketing services companies, split between database processing and traditional marketing.

In 1998, the company restructured its three divisions, grouping its traditional marketing businesses under a new umbrella brand of Maxxcom, and the electronic data businesses as Optus Corporation. (It also attempted unsuccessfully to find a buyer for Regal Greetings, which had turned out to be an expensive distraction). Meanwhile Maxxcom began aggressively pursuing further purchases, with a view to spinning off from the main MDC core. The group policy was not to take outright control but to acquire a controlling stake while also encouraging existing managers to develop the business as if they were still independent, a process it called "Perpetual Partnership". That year alone, Nadal acquired three US agencies, full-service agency Margeotes/Fertitta, digital shop Cybersight and sales promotion company Source Marketing.

Having appointed Beverley Morden as the CEO of Maxxcom, Nadal then signed off a string of major acquisitions during 1999, mostly in the US, including Accent Marketing Services and Fletcher Martin Associates. A year later the group floated a 26% stake in Maxxcom, while also completing further acquisitions including a 49% stake in US ad agency Crispin Porter & Bogusky and UK direct marketing shop Interfocus. The latter had previously formed part of the Lowe Lintas marketing group, until CEO Matthew Hooper took a decision to buy out the business in 2000. In order to finance a simultaneous takeover of UK rival Osprey, Hooper sold 60% of Interfocus to Maxxcom, in return for a guarantee of management control. Also in 2000, the Optus electronic data arm of MDC was sold to North American data delivery specialist Symcor.

In late 2001, the group initially denied reports that it was seeking a buyer, although it confirmed that MDC was keen to reduce its stake further when market conditions improved. It later acknowledged that it had tested out the market for a sale, appointing Goldman Sachs to recruit investors. When no deal was forthcoming, Maxxcom changed strategy. At the start of 2002 CEO Beverly Morden left the group, replaced by Harold Reiter, formerly head of finance group Tyco Capital. His brief was to boost income from the group's various investments.

But by 2003, the strategy had changed again. Reiter too left the business, and MDC began re-absorbing Maxxcom, buying out its public shareholders. Later that year Nadal suggested that he was keen to begin considering further marketing acquisitions. Chuck Porter, a founding partner in ad agency Crispin Porter & Bogusky, was given additional responsibilities for sourcing new acquisitions. This led to the acquisition of leading independent New York agencies Kirshenbaum Bond and Cliff Freeman & Partners in 2004.

After rapid growth in the late 1990s and early 2000s, the pace of acquisitions slowed substantially during 2005, with only one major purchase (of the Zyman Group). Following the purchase of Zyman Group in 2005, that company's founder Sergio Zyman became the second largest shareholder in MDC behind Nadal. However he ended his association with MDC at the end of 2008, selling his shares back to the group. There were no material acquisitions during 2006, but instead the group acquired additional shares in several of its existing subsidiaries. In 2008, rumours circulated that MDC was looking for a buyer, although those reports were denied emphatically by the group.

Last full revision 27th October 2017

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