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MDC's chairman-CEO, Miles Nadal, said the deal is set to close at the end of the month, but would not comment on the purchase price or other deal terms.
Known for nontraditional marketing
The goal is to bring Powell’s creativity to Margeotes Fertitta’s clients, said Powell founder Neil Powell, especially at a time when midsize agencies are struggling to stand out among many smaller, more creative competitors and the powerhouse networks that dominate the industry. Powell is known for its nontraditional take on marketing, looking at alternatives to 30-second commercials and focusing on incorporating design and multicultural aspects into its campaigns for marketers including Rheingold Beer, United Technologies and Viacom network's CMT and MTV.
The combined firm, which will be called Margeotes Fertitta Powell, will be led by Margeotes Fertitta CEO George Fertitta. Mr. Powell, president and executive creative director of his agency, will become executive creative director. Margeotes Fertitta’s president, Michael Kantrow, will oversee the new agency and retain the same title. Margeotes Fertitta’s creative director, Alison Gragnano, will continue her role.
MDC purchased Margeotes Fertitta in 1998. The agency opened in 1973.
“We believe that there’s a movement away from large, multinational agencies toward smaller, entrepreneurial firms who really are in the sweet spot of this phase and have the commitment to help clients grow their brand,” Mr. Nadal said.
Mr. Powell, who worked at the Publicis Groupe's Fallon Worldwide for nine years before founding his agency, said Margeotes Fertitta Powell will fill a hole in the industry between small and large agencies.
A big hole to fill
“I have been grouped in with a lot of other great talent in the small, independent agencies in New York, and there isn’t a middle ground,” he said. “There is a big hole we can fill as a midsize agency with a holistic approach to our clients. Small guys don’t have the bandwidth, and huge behemoth agencies don’t have the innovative creative power.”
Mr. Nadal said the merger was originally proposed by Margeotes Fertitta and brought to him earlier this year by agency executives and Powell. He said MDC was glad the merger was an “arranged marriage” because it represents the acquisitive agency’s overall desire to allow its firms to stay as entrepreneurial as possible.
Mr. Powell said he wasn’t actively looking to merge with any other agency, and some people are questioning his decision to give up some of his firm’s independence, but conversations with Margeotes Fertitta executives beginning in late February encouraged him to turn to MDC.
Small agency in New York
“It’s hard to be a small agency in New York. As good as our work is, and as interesting and different it is, we’re still a small company and it keeps us out of a lot of bigger opportunities,” he said. “But they [MDC] allow their agencies to operate autonomously. I felt like the next big step for Powell would be to enhance our offering with some great resources.”
Mr. Kantrow said he has also been questioned as to why his agency would be interested in merging with such a smaller firm -- Margeotes Fertitta has 150 employees, compared with Powell’s 17 -- but he attributed his willingness to merge to both Mr. Powell’s “creative point of view” and the independent, entrepreneurial nature of both Powell and MDC.
“The advantage of working with an entrepreneurial company or agency and an entrepreneurial group like MDC is that we have the opportunity to make things happen faster. The corporate politics just aren’t there,” he said. The combined agencies' client roster will include Lugz shoes, Geoffrey Beene, Lord & Taylor and Independence Bank.
MDC has stakes in once-independent creative agencies such as Crispin Porter & Bogusky, Kirshenbaum Bond & Partners, Mono and Cliff Freeman & Partners. After buying into some well-known agencies last year, MDC’s acquisitions seem to have died down, but Mr. Nadal said the agency is going to start getting even more aggressive in the coming months.
More acquisitions to come
“We made our largest acquisition earlier this year of ... the Zyman Group. That was a very significant account for us,” he said. “We have been not very acquisitive lately subsequent to that because of the digestion of all that. Is our expectation that we will start to be more acquisitive over time in the latter part of the year and certainly next year.
“We are always in the market to try and enhance the palette of our organization,” he said. “No matter how successful we are, we can always find new talent to add to our existing organization.”
As far as MDC’s most recent acquisition goes, Margeotes Fertitta Powell will have 167 employees and combined billings of $255 million -- $25 million from Powell and $230 million from Margeotes Fertitta, Mr. Powell said.