Mark Penn may be on the cusp of consolidating his advertising empire.
Stagwell Group, the holding company founded by Microsoft alum Penn in 2015, has proposed a merger with MDC Partners, where Penn serves as CEO. Stagwell Group executives delivered a letter proposing the merger to the MDC Partners board of directors on Thursday.
MDC Partners includes agencies such as 72andSunny, Anomaly, Assembly, Colle McVoy, Crispin Porter + Bogusky, Doner, Forsman & Bodenfors and mono. Stagwell’s agencies include Code and Theory, Finn Partners, Observatory, PMX Partners and Wolfgang. Combined, the holding companies would have generated over $2 billion in net revenue last year, according to data from Stagwell Group.
In March 2019, Stagwell Group agreed to a $100 million investment in MDC Partners with Penn taking over as MDC Partners CEO. Last December, MDC Partners formed a network of seven agencies led by Detroit-based Doner, a move that followed the formation of a five-agency “collective” including 72andSunny, CPB and Instrument in February.
“I am excited about the potential combination of MDC Partners and Stagwell, and expect the combined company will deliver meaningful shareholder value creation, accelerated growth and enhanced services to clients,” Penn said in a statement.
Stagwell Group’s proposal argues the merger would help both companies scale their offerings and better serve clients, create products based on combined data and tech assets, create value through a streamlined operations budget of about $35 million per year, and allow for additional growth via its mergers and acquisitions platform and partnership model.
J.P. Morgan is acting as financial adviser and Freshfields Bruckhaus Deringer as legal adviser to Stagwell for the proposal. The MDC Partners board is expected to form a special committee to consider the proposal, according to Stagwell Group. No alternative transaction by MDC Partners will be considered, including an alternative merger or sale.
The move is perhaps not a surprise, given the ties between the companies.
“If a collaboration of two compatible groups makes sense, then the eventual consolidation of the right pieces of that would also make sense,” Forrester Research principal analyst Jay Pattisall told Adweek at the time of Stagwell’s investment.