New CEO Kauffman says it’s business as usual at MDC

So far so good it seems for MDC Partners, which has parted with founder and CEO Miles Nadal who’s being investigated by the Us SEC for various alleged misdemeanours. Nadal has agreed to pay back the company a further $12.7m in wrongly claimed expenses, bringing the total to about $20m.

20a8759New CEO Scott Kauffman (left, not an adman by trade) says the company, which owns all or part of Anomaly, Crispin Porter and 72andSunny among others, made an “expected” loss of $2.5m in Q2, against plus $7.6m in Q1. MDC reported a 7.8 percent rise in organic revenue and an increase of 11.3 percent in overall revenue. MDC stuck with full-year revenue growth of between 6.5 percent and 8.5 percent to about $1.3 billion.

Kauffman also said MDC had bought the 49 per cent of 72andSunny it didn’t own and that the agency’s principals had agreed to stay on for another five years. A key issue for MDC – and anyone thinking of buying it – will be: does this commitment change with a change of ownership? It would be more than a minor miracle if MDC is still ploughing the same, highly leveraged furrow in five years.

He said the company was still on the takeover trail, hoping to expand in media and outside the US, which currently accounts for just nine per cent of revenue. Both these areas are posers for the company. Media agencies deliver more revenue to holding companies than creative agencies these days but there aren’t any big independents left to buy.

Its weak position outside the US, where it has outposts like 72andSunny in Amsterdam and Albion in the UK, will also be expensive to remedy. Providing each of its agencies with their very own network clearly isn’t on. Would an international MDC network work?

There is doubtless rather more to come from the MEC, which has expressed disquiet about some of MDC’s historic accounting practices, notably its use of EBITDA numbers. There are also a pack of New York class action lawyers on its tail.

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