MDC Fends Off Possible Sale With $95 Million Investment From Goldman Sachs

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MDC Partners CEO Scott Kauffman.
MDC Partners CEO Scott Kauffman. Credit: Courtesy MDC Partners

After hiring Liontree Advisors last year to evaluate its financial and capital structure strategy, MDC Partners has entered an agreement with Goldman Sachs in which the Merchant Banking Division will invest $95 million in the agency holding company.

MDC's portoflio of agencies includes 72andSunny, CP&B, Doner, KBS, Laird & Partners, Redscout and Vitro. Once the deal is complete, Goldman Sachs will own about 15% of the company.

MDC ranked 13th among agency holding companies in 2015, down from 12th in 2014, according to Ad Age Datacenter rankings.

The pact ends MDC's engagement with Liontree, meaning the financially embattled company has fended off the possibility of a sale. Goldman Sachs' Bradley Gross, a managing director in the Merchant Banking Division, will join the MDC board of directors.

The global investment banking firm purchased non-voting convertible preference shares, so unlike regular shareholders, the company cannot vote on business matters during events like annual meetings, according to someone with knowledge of the matter.

MDC Partners declined to comment on its previous relationship with Goldman Sachs, but a spokesperson said nothing about the deal makes the firm a client.

A source close to MDC said the deal is "very strong" and "shows the strength of MDC and the power of the operating companies," adding that this means the holding company will not be sold for now. "Goldman basically believes that MDC is way undervalued," the person told Ad Age.

Last November during the third-quarter earnings call, however, MDC Partners CEO Scott Kauffman said the company's performance "just isn't good enough."

"We are taking actions to fix it," he added.

While MDC executives at the time declined to go into detail about what Liontree was exactly helping the company with beyond evaluating its capital structure, analysts suggested the engagement meant MDC was exploring the possibility of a sale.

Contributing: E.J. Schultz

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