MDC Finally to Achieve Scale It Predicted Back in 2004

But What's the End Game for This Now-$1B Company?

By Published on .

In 2004, Miles Nadal, the man atop MDC Partners, predicted that within a five-year span his holding company would blossom into a billion-dollar business.

It didn't happen quite that fast, but in 2012 he expects to achieve it.

Nadal Miles
Nadal Miles

Last week, the company revised its revenue guidance, increasing it by $50 million to a range of $1.05 billion to $1.075 billion -- a rise of somewhere between 11% and 14% over the company's 2011 figures. Last year, MDC's revenue was $943.27 million, up significantly from $689.15 million in 2010.

Much of that growth has been the result of an aggressive acquisition strategy, and the story is far different from a profit perspective. The company booked a net loss of nearly $84 million in 2011.

In fact, MDC has posted a net loss in four of the past five years; in 2008 the company made a meager $133,000 net income attributable to MDC. Its stock slumped to a 52-week low on April 3, the day before MDC announced its deal to make a minority investment in Southfield, Mich.-based agency Doner.

The company is still relatively small. By comparison, WPP Group, the country's largest holding company, had a profit of $1.46 billion in 2011, more than MDC's revenue figure. WPP's year-end revenue was $16.1 billion.

Still, MDC, which started up in 1980, estimates it now accounts for 2% of the U.S. market, meaning it has nearly doubled in revenue in the past few years, largely by gobbling up agencies all over adland. And the seemingly never-ending string of deals means MDC's footprint continues to grow as well.

There have been missteps along the way. Shops such as Cliff Freeman & Partners, Margeotes & Fertitta and Zyman Group shuttered, and some in the empire, such as Kirshenbaum Bond Senecal & Partners and Vitro, are absorbing sibling agencies.

For the most part, Mr. Nadal's focus has been on chasing small, entrepreneurial shops, taking a majority stake and eventually increasing ownership to 100%.

During the past three years, the company has acquired or invested in a range of agencies, such as Team Enterprises, Sloane & Co, Allison & Partners, Anomaly , 72andSunny, Laird & Partners, Concentric Pharma, R.J. Palmer, Dotbox and Targetcast.

The most recent deal -- a "significant" minority stake in 75-year-old Doner -- was jarring given MDC's stated strategy of investing in upstarts.

Now that Mr. Nadal is achieving the scale he has aspired to, what's the end game for all these companies sitting under his umbrella?

At the 4A's conference in Los Angeles last month, Mr. Nadal sidestepped questions about the future of MDC. He said that he's not in talks with any parties but is open to discussion.

MDC's foreign investment is small (CP&B's just-opened Brazil office joins outposts in London, Sweden and Canada; 72andSunny is in Amsterdam; and Anomaly and Doner have London shops). Because of that , it seems less likely that MDC would find a buyer in a U.S.-based holding company than in a global buyer wanting to bolster a North American presence.

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