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What does Goldman have in mind for its stake in MDC?

MDC Partners has moved to avert a fate verging on death – the quoted agency group has liabilities of $2.09bn and assets of just $1.6bn – by agreeing to sell a 15 per cent stake to Goldman Sachs for around $95m.

This values the whole entity – which includes Anomaly (Ad Age’s 2016 Agency of the Year), KBS, 72andSunny and the much-reduced Crispin Porter – at around $600m. Anomaly, of which MDC owns 60 per cent, could be worth at least $50m on its own so it’s pretty obvious that the market doesn’t have much faith in the rambling MDC structure, assembled at high cost by defenestrated founder and CEO Miles Nadal.

In the usual course of events MDC would have been snapped up by one of the marcoms giants years ago but creative networks are out of fashion and MDC lacks a strong media operation. It’s still surprising that the likes of Dentsu, which still lacks a major international creative force, haven’t made a move but maybe unraveling the thing is too much like hard work.

So what does Goldman, not noted for its munificence although $95m is small change for the Wall Street giant, plan to do with its investment? The usual answer would be: sell it on at a profit and it may be that Goldman will be doing the rounds of Dentsu, WPP, Omnicom et al. It may also be chatting up its friends in the big management consultancies who are taking an interest in ad agencies, most notably with Accenture Interactive’s buy of Karmarama. Many of the consultancies make money from media auditing so they don’t want or need a media agency.

Or maybe Goldman, which now has a director on the board, can see the benefit (short term anyway) of becoming a marcoms company owner. MDC has never made a profit in its lengthy history but Goldman, surely, knows how to deliver one of those. Disposals and closures would surely be part of such a plan.

Well we actually quite like MDC; it owns some decent agencies producing good work – like Anomaly and 72andSunny. With the marcoms giants struggling to grow in a slow growth world economy, inhabited by procurement-driven clients who think they’re being ripped off somewhere along the line, a different perspective might work wonders.

Update

Anomaly’s Carl Johnson tells me he reckons Anomaly is worth much more than our estimate, with a growing roster of blue chip clients. So, in theory, MDC is worth more than the market reckons. Maybe Goldman has indeed found itself a bargain.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.
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