Stagwell Group, the agency company founded by former Microsoft executive Mark Penn, is in negotiations to make a $100 million investment in MDC Partners under the terms being discussed, according to two people familiar with the talks. If the deal is finalized, Penn, known as a longtime political strategist for Hillary and Bill Clinton, is expected to lead MDC as part of the investment.
Stagwell is not expected to assume MDC if the deal closes. Instead, it is expected to get up to two board seats at MDC, which will remain as a separate publicly traded entity, according to the people familiar with negotiations.
Stagwell declined to comment.
An MDC spokeswoman stated: "The strategic review process we previously announced remains ongoing. We have no comment on the rumors and speculation surrounding this process. We will provide updates on both the strategic review and CEO successor search at the appropriate time."
MDC confirmed late last year that it was considering "potential strategic alternatives" that could include the sale of the agency holding company, whose portfolio includes 72andSunny, Anomaly, Assembly, Colle McVoy and Doner. The holding company had struggled with subpar financial results—attributing its "unacceptable" first-quarter 2018 results to client cutbacks and slower conversion in its new-business pipeline. MDC has been under pressure from activist investor FrontFour Capital to shake up its board of directors. With the Stagwell investment, "the much-needed process of reshaping the board will begin," said the person familiar with the deal.
Penn made a splash in 2015 when he announced the launch of Stagwell Group, a new kind of holding company that would focus in advertising, research, data analytics, PR and digital marketing companies. The company launched with $250 million in investment capital—including funding from ex-Microsoft CEO Steve Ballmer. Stagwell's portfolio now includes more than 15 agencies it describes "digital-first," including MMI Agency, Scout, Harris Insights & Analytics, performance marketing firm PMX Agency, creative digital shop Code and Theory and strategic communications agency SKDKnickerbocker.
In August 2018, Stagwell said it had raised $260 million in funding from global private equity investor AlpInvest Partners.