Commentary by Jonah Bloom

MDC Stalking The Best U.S. Independent Ad Agencies

Miles Nadal's Operation is Relatively Small, But Has an Interesting Model

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Holding company MDC Partners has attracted a lot of ink in its native Canada, but with the exception of a couple of news reports in The Wall Street Journal and Advertising Age -- prompted
Jonah Bloom, executive editor of Advertising Age.
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by its partial purchases of Crispin Porter & Bogusky and Kirshenbaum Bond -- it has made little noise in the U.S. and Europe.

A parenthetical afterthought
That's understandable. According to all holding company metrics, MDC is no more than a parenthetical afterthought to a boldface paragraph. Its market cap is hovering around $300 million, a fraction of the market's $1.6 billion valuation of Havas, itself a distant fifth in market cap rankings behind Publicis and Interpublic, themselves a long way behind WPP and Omnicom. MDC's marketing revenues will be around $280 million this year -- that's a currency blip for the Big Four.

Then there's the fact that MDC is based out of Toronto, which may be a hotbed of creativity but gets little attention from the U.S. media. Likewise Miles Nadal, MDC's chairman-CEO, lacks the business-section-superstar status of his Big Four counterparts.

MDC, however, is worth watching. Why? Well, most obviously because it is on a buying spree that will see it taking a stake in some of the most exciting marketing agencies in the business. It took a minority stake on March 11 in storied New York creative agency Cliff Freeman & Partners.

$100 million to spend
Nadal says MDC is in talks with as many as 30 agencies, and has $100 million to spend. But Chuck Porter, his chosen chief strategist, wants only the best and won't spend for the sake of spending. My guess is that the usual suspects such as Modernista! and Cramer-Krasselt are high on the shopping list -- alongside fast-growing and creative David & Goliath. But MDC's biggest splash in the near future could be a stake in one of Europe's hottest shops, maybe Mother, Naked, or Amsterdam's Strawberry Frog.

Only Omnicom, when it started on its journey in 1986, has tried to create a network of "best-in-class" agencies and, given that there aren't too many left following the buying sprees of the late '90s, it's going to be interesting to see whether it can be done again.

The best reason for tracking MDC, however, is that it is challenging conventional wisdom about the holding companies and the way clients work with agencies.

The first thing Big Four execs will say about its strategy -- I spoke to two -- is that it's difficult to do anything with agencies you don't fully own. But MDC claims that is a strength, because the principals -- the folks most clients most value -- stay vested in the business and continue doing whatever made them successful. MDC promises not to have any role beyond finance, in running its shops.

Attracting multinational brands
The Big Four will also point out that creating a truly global network takes many years and hundreds of millions of dollars and that MDC simply does not have the financial muscle to create such a network. Thus, goes the logic, MDC cannot hope to attract big multinational brands. But with a number of major marketers -- most notably Coke and Burger King -- showing that they want the best idea and not the biggest network, MDC will feel its shops have as good a shot at many big brands as anyone else.

But how would those shops distribute a campaign globally? Ah, well, that's where the Big Four's unbundled media companies come in.

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