MDC and Stagwell agree to merger

The combined entity is targeting $3 billion in revenue within four years, driven largely by growth in digital.
mdcpartners

Marketing services holding company MDC Partners and private equity firm Stagwell Group have reached a definitive agreement to make their proposed merger official.

Mark Penn – who leads both companies as chairman and CEO of MDC Partners and managing partner of The Stagwell Group – said in the announcement that the combined company has the talent and technology to make “a transformative marketing services company.”

“MDC is celebrated for bringing award-winning creative firepower to the world’s leading and most ambitious companies, and Stagwell has been built with deep and sophisticated technology at its core,” he said. “Unencumbered by legacy structures or assets, the combined company will have the integrated, modern offerings marketers deserve, and the resources to invest meaningfully in our global capabilities, our talent and our clients’ future.”

MDC – which owns agencies including Anomaly, 6Degrees, Forsman & Bodenfors, Media Kitchen, Union and Veritas – will become an LLC incorporated in Delaware, making its move from Canada to the U.S. official. While approved by the companies’ respective boards, the deal is still subject to approval from MDC shareholders and regulators.

The announcement, made Monday evening after market close, includes details about the financial state and prospects of the combined entity, which Stagwell says would have generated US$2 billion in revenue in the last year.

It is targeting over 5% organic growth annually, driven by an expected 10% to 15% growth in digital marketing and related capabilities, areas where it plans to expand its revenue streams and “more than triple” its offerings to 32% of the business.

Its media and data companies will manage US$4.4 billion in media spend. It also expects over 9% total revenue growth when including prospective new products and acquisitions, and has targeted over US$3 billion in revenue by 2025.

The combination will also generate approximately US$30 million in savings from operational costs, 90% of which is expected within the first two years of the merger.

MDC has been actively seeking potential buyers for part or all of its business for several years, regularly struggling to post positive financial results, even compared to other holding companies that have been grappling with long-term disruption in advertising. By the end of Q3, MDC had reported a 14.1% decline in organic revenue for the year-to-date; while that was largely attributed to the impacts of the COVID-19 pandemic, that decline was much more stark than at other major holding companies.

One way MDC has been facing its challenges more recently is by grouping its agencies into new networks that promote collaboration, offer a wider range of services to clients and streamline back-end operations and costs. Just over one year ago, it created a network led by Detroit-based Doner that also included Veritas and its influencer and content division Meat & Produce, as well as Union, 6Degrees and KWT Global. Over the summer, Anomaly became the centre of a new network that includes Y Media Labs, Mono, Hunter, Relevent and Concentric Health Experience.