MDC Partners has acquired a majority interest in Dotbox, a New York-based social-commerce firm with a portfolio of retail and luxury clients that includes 1-800-Flowers, Vince Camuto, Bebe, Harry Winston and Jessica Simpson.
Dotbox is a relatively young firm, founded in 2008, with about 35 employees. The company describes its capabilities as e-commerce solutions, website design, socially integrated campaigns, mobile apps and strategic consultation and training on social commerce. Terms of the deal were not disclosed, but Miles Nadal, chairman-CEO of Toronto-based MDC, told Ad Age , "This is a modest-sized investment."
The motivation was to help MDC fill capability gaps in its family of agencies. "E-commerce is one of the most important strategic areas of expertise we need to have," said Mr. Nadal. "Clients need to scale their e-commerce activities significantly. If you look at most retailers, the fastest-growing area for them is e-commerce." Before considering the purchase, MDC management received positive feedback about Dotbox from its retail-oriented shops HL Group and Laird & Partners, he said.
Dotbox's selling to MDC was motivated by the chance to scale the agency, which has grown mostly through customer referrals.
"We really wanted to find a partner to help us grow to the next scale," said Ashley John Heather, CEO and co-founder of Dotbox. The company began looking for a buyer late last summer and was introduced to MDC executives through a mutual friend. "We had a few informal meetings, and once we had a chance to meet Miles and his leadership team, everything clicked into place," said Mr. Heather. "The relationships we've been building are great, but there's also a lot of new relationships we can step into. ... Miles and his team are focused on finding synergies among the agency groups."
Mr. Heather hopes that sibling agencies under the MDC banner can help fuel new business for his shop, and vice versa. Dotbox has pretty aggressive growth goals. "We're not looking to necessarily be a boutique agency that stays 30 people for the next 10 years," said Mr. Heather, adding that down the road he envisions the shop having more like 300 staffers, and offices on the West Coast, London and perhaps other markets.
The purchase of Dotbox is the latest of about 20 purchases MDC has made over the past couple of years -- moves that have cost the company well over $100 million. Now that MDC has gained scale, its focus will be on organic revenue growth, adding more clients across its agencies and curtailing its acquisitions spree.
While revenue is up 20.5%, to $254.3 million, MDC posted a loss of $57.7 million in the fourth quarter. In the year-earlier quarter, it earned $11.5 million. It had a net loss of $84.7 million for full-year 2011, after losing $15.4 million in 2010.
Asked about the company's acquisitions plans going forward, Mr. Nadal said, "I think we will be very strategic and probably not do as many acquisitions as we were, and certainly not as much as we did in 2010. If we do things, you'll see some activity on the international front come through ... and you'll probably see us expand our media [offerings]. We'll be more discriminating as to what we do and how we do it."
Mr. Nadal said that he considers the company "more in a steady state of M&A activity" now and that no more than three or four transactions a year is probably a good pace for MDC from here on out.
So far this year, MDC has two. In January, it acquired media agency R.J. Palmer.