This week, MDC Partners finally ended its long-running search for a new leader when Mark Penn’s Stagwell Group confirmed that it would spend $100 million to buy just under 30 percent of the holding group.
Penn will now add MDC CEO to his considerable resume, which includes head of WPP’s PR firm Burson-Marsteller, Microsoft chief strategy officer, political pollster who invented the controversial “soccer moms” demographic, and adviser to Bill and Hillary Clinton who led the latter’s unsuccessful 2008 presidential run.
The day after his new role became official, Adweek spoke to Penn about his plans to partner the two portfolios, manage the many disparate properties within and address the financial challenges that took MDC’s stock price from $22 to $2.32 in less than two years.
Adweek: Why do you feel that now is the time to invest in advertising agencies, given recent changes in the industry?
Mark Penn: People have gotten a little bit over their skis in terms of declaring that advertising agencies are dead. The big holding companies from a generation earlier than MDC have a lot more legacy properties, and they hit a slowdown of growth in television media while digital media continues to grow at double digits. I think, in reality, the assets that MDC has were being undervalued, because top level creativity, even if it’s going to be bought in more efficient units, is still going to be the most highly prized asset.
I think that, by balancing out the weight across pure creativity and media and other services, it’s actually a growing industry that’s being masked by the fact that some of the segments and some of the services are shrinking.
Stagwell has been acquiring smaller agencies across the country for several years. Do you plan to approach the new investment in the same way? How will the two portfolios work together?
They are mid-size agencies with growth potential who handled A-list clients and achieved 18 percent organic growth last year. They’re highly complementary [with MDC] because they don’t have the kind of large scale, top-tier relationships that MDC has.
We want to bring some of the good metrics we’ve achieved with Stagwell and with my experience running agencies; that’s where I think there’s room for improvement in terms of financial performance. But when you look at the two sets [of companies], hopefully they will find value in each other. At Stagwell I’ve been able to foster that kind of culture, and I found at WPP it was sorely lacking. So I hope to expand the level of cooperation and collaboration within the agencies in MDC.
Could you elaborate on that comment about a lack of collaboration at WPP?
Yes, we generally viewed the other agencies as sharp-elbowed competitors.
How will your experience as a political consultant and client-side executive inform your new role at MDC?
I think that my experience is across business, starting as a founder and growing a significant agency [Burson-Marsteller], then managing large assets. It’s also actual professional experience and polling and messaging, you know, creating things like “soccer moms” or, in advertising, creating some rather memorable campaigns. I hope to bring to bear those twin aspects of my experience.
The holding companies are either going to look at the center as an asset that can be really helpful or as a drag, a hindrance and a bureaucratic nightmare. I’m hoping that we can be of the asset and the help side of that rather sharp divide.
Did you meet with most of the heads of MDC’s agencies before you agreed to this deal?
I have met a number of them through my professional experience, but if we’d held a series of meetings like that, I don’t think the story would have held as long as it did.
Several would-be MDC bidders dropped out in the final weeks. Why did you persist?
I think we found a win-win formula. There were a lot of formulas that would have put the company at more, rather than less, peril. I bring $100 million to improve the balance sheet, leadership that I hope can give confidence to the partners and the agencies, and I’ve developed a plan that I’m going to be able to take to them. By the next quarter, I think we’ll be revealing more about that plan.
MDC is more than $1 billion in debt. How will you address that?
Well, out of the gate, the investment drops the debt level half a turn. We’re going to be pressing to get it below four over time here. I think that we do have room for investment and we do have capabilities for that, but I look at the debt ratio and say that one of my jobs is to continue to move that down.