MDC Partners Inc

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MDC Partners Inc.

45 Hazelton Avenue
Toronto, Ontario M5R 2E3
Telephone: (416) 960-9000
Toll Free: (800) 387-0825
Fax: (416) 960-9555
Web site:

Public Company
Incorporated: 1980
Employees: 4,700
Sales: $312.71 million (2003)
Stock Exchanges: Toronto
Ticker Symbol: MDZA
NAIC: 541990 All Other Professional, Scientific and Technical Services

MDC Partners Inc. is a leading marketing communications firm that owns interests in roughly 20 marketing agencies. MDC operates more than 30 offices, serving high-profile clients such as AOL, Sprint, Xerox, and Purina. The company generally acquires between 51 percent and 80 percent of advertising agencies, giving each agency control over the day-to-day operation of its business.


The history of MDC was the story of the entrepreneurial ventures and diverse investments made by Miles Nadal, MDC's founder, chairman, chief executive officer, and president. Nadal exerted comprehensive influence over the development of MDC, guiding the company through a divergent corporate life that saw a small photography business develop into a leader in the secure transaction business before becoming an entity charged with overseeing dozens of loosely affiliated marketing agencies. MDC, as it existed in the early 21st century, represented the former communications and marketing division of MDC Communications Corp., a company that garnered the bulk of its revenues from the secure transaction business for most of the 1990s. The individual behind the various incarnations of the MDC enterprise was Nadal, who started his maturation into a multimillionaire in 1980, when he formed a photography business while in his early 20s.

Nadal joined Canada's wealthy elite by turning his photography business into a leader in the secure transaction business, a rise that did not begin until the mid-1990s. During the mid-1990s, Nadal's company was operating as MDC Communications Corporation, which was divided into two divisions: secure transaction products and communications and marketing services. The secure transaction products division recorded exponential growth during the second half of the 1990s, increasing its sales from CAD 39 million in 1995 to CAD 361 million by 1998. The division, which produced products such as checks, credit and debit cards, airline and event tickets, and postal stamps, achieved its revenue growth in large part through acquisitions, although the company recorded substantial internal growth, particularly in its check-producing business. In 1996, MDC acquired Canadian check producer Davis + Henderson, which boasted a 40 percent share of the country's market. During the ensuing two years, the company doubled Davis + Henderson's revenues and its market share. MDC's secure transaction division also made other ground during the mid-1990s, entering the global card services business in 1996 with the acquisition of an Australian company named Placard Security Pty Ltd. The following year, the company acquired a Canadian company, Bicybec Ltee, and the card-production unit belonging to Canadian Imperial Bank of Commerce. Further expansion of MDC's secure transaction business occurred in 1996, when the company acquired Data Imaging, an electronic printing and mail service bureau catering to financial institutions and the retail industry.

The growth of MDC's secure transaction business was complemented by strides achieved in the company's other business segment, its communications and marketing services division. While MDC's secure transaction division increased its revenue volume, the company's communications and marketing services division was recording growth as well, eclipsing the CAD 100 million mark in 1998, when the division was renamed Maxxcom Inc. The name change was significant, signaling Nadal's intention to spin the division off as a separate, publicly traded company in the near future. The division, which recorded a CAD 35 million increase in sales to slip past CAD 100 million in sales in 1998, had been built up in large part in Canada by this point. Nadal had purchased roughly a dozen Canadian marketing companies to give the division its foundation. The exceptions to the native profile of the division arrived in 1998, and they were telling additions. Although his plans were not publicly broadcast by 1998, Nadal intended to create a network of advertising agencies and marketing companies with a global reach. He began to aim toward this goal in earnest in 1998, and he directed his efforts toward the United States.

Entering the United States in 1998

MDC's foray into the United States reflected Nadal's desire to build a global competitor in the advertising and marketing industry. The company completed its first U.S. acquisition in May 1998, when it purchased a Portland, Oregon-based Internet marketing firm named CyberSight. MDC also acquired Source Marketing, a Westport, Connecticut-based sales promotion firm. The most significant acquisition of the year was the company's investment in a New York City-based consumer agency named Margeotes/Fertitta & Partners (MFP). MFP's clients included MediaOne, United Distillers & Vintners, and Hearst Corp. The acquisition represented MDC's foundation for its aggressive expansion into U.S. marketing communications.

The investment in MFP was a model of Nadal's acquisition strategy in the United States. Although MDC did not disclose the amount of the investment, industry observers estimated the company spent between $25 million and $35 million for an 80 percent stake in MFP. In the years ahead, MDC typically purchased between 51 percent and 80 percent of an acquisition target. Once its investment was made, the company left the dayto-day operation of the acquired agency to the firm's executives, who generally retained a stake in their business's profitability. Nadal's hands-off approach created a loose and mostly autonomous collection of marketing firms, a federation of agencies that occasionally referred clients to each other but otherwise operated independently. MDC, as Maxxcom's owner, represented what ADWEEK, in the trade publication's March 22, 2004 issue, referred to as an "antiholding company," an arrangement that promoted creativity and encouraged an entrepreneurial spirit throughout the organization. "Large holding companies go at it in a backwards manner," an industry analyst remarked in a March 22, 2004 interview with ADWEEK. "They buy a company and focus on cost cutting. Miles [Nadal] buys a company and focuses on expanding revenue."

Nadal's partnership model appealed not only to industry pundits, but also to the management of acquisition candidates. Agency owners generally readily agreed to Nadal's solicitations, attracted by the independence they would retain and the access to financial resources they would gain by affiliating themselves with MDC's Maxxcom. In 1999, when MDC changed its name from MDC Communications Corp. to MDC Corporation Inc., Nadal completed his next major U.S. acquisition. In April, he paid an estimated $19 million for an 80 percent stake in Colle & McVoy Inc. (the remaining percentage was acquired later). Founded in 1935, Minnesota-based Colle & McVoy provided advertising, public relations, market research, and other services to clients such as 3M Co., Caterpillar, and Winnebago. The reaction of Jim Bergeson, Colle & McVoy's chairman and chief executive officer, typified the response of executives whose agencies joined Maxxcom's fold. "It was appealing to us from a standpoint that MDC is truly a holding company," Bergeson explained in an April 1, 1999 interview with Business Marketing. "They don't want to run our business on a day-to-day basis. They're very hands-off. Their model of perpetual partnership is unique in the industry. It's a much more appealing way to get access to capital that we need to grow our business."

As MDC concluded its second decade of existence, its Maxxcom division was shaping into the company's most valuable asset, although the company continued to generate the majority of its revenue from its secure transaction division. The acquisition of Colle & McVoy was one of seven acquisitions completed by Maxxcom in 1999, helping the division to more than double its revenue volume during the year to CAD 214 million. The gap separating the two divisions' revenue totals promised to narrow in the near future, as Nadal placed increasing emphasis on acquiring marketing and communications companies. "We will look in Europe," Nadal said in an April 1, 1999 interview with Business Marketing, referring to the company's search for acquisition candidates in the marketing field. "We will look in Asia. We will look in Latin America. We will look in Eastern Europe."

Nadal's expansionist mood reflected the importance he was placing on Maxxcom's role within MDC. The communications and marketing division was driving the company's revenue growth at the start of the new decade. MDC surpassed CAD 1 billion in sales for the first time in its history in 2000, a year that also marked the first time the company generated more revenue from communications and marketing services than from secure transactions. For the year, Maxxcom recorded CAD 605 million in sales, while the secure transaction division posted CAD 561 million in sales. During the year, Maxxcom acquired nine companies, most notably a London, England-based company named Interfocus Network Limited. The year's most significant event occurred in March, when Maxxcom completed its initial public offering (IPO) of stock, raising CAD 62.4 million from the offering. After the IPO, MDC remained Maxxcom's majority owner, retaining a 76 percent interest in the company.

Company Perspectives:

We offer an alternative to traditional agency networks that have rigid structures, standardized processes, and a geographical client focus. MDC Partners fosters the entrepreneurial spirit of our partner firms by encouraging creativity and autonomy while providing human and financial resources to accelerate growth.

Restructuring in 2001 Increasing the Role of Marketing Communications

MDC was beset by difficulties in the wake of Maxxcom's IPO. Recessive economic conditions caused a slowdown in the advertising, marketing, and communications sector throughout North America. Further, the company was hobbled by more than $500 million in debt, a consequence of its aggressive acquisition campaign. Nadal stopped his acquisition activities in the fall of 2001 and initiated a companywide restructuring program that greatly reduced MDC's involvement in the secure transaction industry, but before he retrenched his acquisition campaign, several significant investments were made. During the first half of 2001, Maxxcom acquired a majority interest in Grange Advertising, ranked as one of the leading five business-to-business agencies in the United Kingdom. Maxxcom also invested between $10 million and $15 million for a 49 percent interest in a well-known, Miami, Florida-based advertising agency named Crispin Porter + Bogusky (CP+B).

Nadal began to restructure MDC in September 2001, when the company's stock plunged to below CAD 2 per share. As part of the restructuring efforts, MDC's check-printing businesses were divested, greatly reducing the revenue obtained from its secure transaction division. Another aspect of the restructuring program involved the privatization of Maxxcom, a process completed in July 2003, when MDC acquired all the Maxxcom stock it did not already own. By the end of 2003, the company was ready to begin building again, with Nadal announcing that he was prepared to invest $100 million in the advertising business. The promise to expand was fulfilled in early 2004, when the company, which adopted the name MDC Partners Inc. in January 2004, completed several high-profile acquisitions.

The investments completed in 2004 greatly expanded the awareness of MDC in the United States, leading Nadal to comment in a March 22, 2004 interview with ADWEEK that MDC "took 24 years to build and six months to get recognized." After several months of negotiations, MDC spent between $50 million and $75 million for a 60 percent interest in Kirshenbaum Bond + Partners (KB+P), a firm that an MDC executive referred to as "one of the two best independent agencies of significant size left in America," as quoted in the February 2, 2004 issue of ADWEEK. The New York City-based agency claimed more than $500 million in billings and nearly $50 million in annual revenue, serving clients such as Target Stores, Snapple, and Hennessey. While the deal with KB+P was being concluded, Nadal was in the midst of negotiations with another high-profile agency, Cliff Freeman and Partners. MDC spent between $3 million and $5 million for a 20 percent stake in Cliff Freeman, completing the deal in March 2004.

By the spring of 2004, MDC's prospects were far brighter than two years earlier. The company's stock value had increased significantly, trading around CAD 20 per share in April. Additional investments were expected in the future, as Nadal sought to fulfill his pledge of devoting $100 million to fuel MDC's growth. In the March 22, 2004 issue of ADWEEK, a research analyst expressed his confidence in MDC enjoying a successful future. "The Procter & Gambles and DaimlerChryslers of the world are always going to want and need a global network like the big guys," the analyst said. "There is plenty of business for MDC to win on a slightly smaller scale, and that's where they are focused right now."

Principal Subsidiaries

Maxxcom, Inc.

Key Dates:

Miles Nadal starts a photography business, the fore-runner to MDC.
MDC's communications and marketing services division is renamed Maxxcom; Maxxcom begins acquiring marketing agencies in the United States.
Maxxcom acquires Colle & McVoy Inc.
Maxxcom completes its initial public offering of stock.
Maxxcom acquires a 49 percent interest in Crispin Porter + Bogusky.
MDC returns Maxxcom to the private sector.
MDC acquires stakes in Kirshenbaum Bond + Partners and Cliff Freeman and Partners.

Principal Competitors

Omnicom Group Inc.; Havas; American Banknote Corporation.

Further Reading

Callahan, Sean, "Canadian Firm Builds Stable of Agencies," Business Marketing, April 1, 1999, p. 3.

Cardona, Mercedes M., "Margeotes Goes North to Find Buyer," Advertising Age, August 10, 1998, p. 1.

Dini, Justin, "Margeotes Sells to MDC," ADWEEK Eastern Edition, August 10, 1998, p. 2.

Koelln, Georgann, "Communications Firms Based in Minneapolis, Toronto to Merge," Knight Ridder/Tribune Business, March 10, 1999.

Levy, Melissa, "Toronto Firm to Acquire 80 Percent of Colle & McVoy," Star Tribune, March 10, 1999, p. 3D.

" 'Who Is This Guy?,"' Forbes, February 16, 2004, p. 108.

Zammit, Deanna, "A Little-League Holding Co. Gets a Bigger Profile," ADWEEK, March 22, 2004, p. 16.

, "MDC Acquires Majority Stake in Kirshenbaum," ADWEEK Eastern Edition, January 29, 2004, p. 5.

, "With KB&P Bought, MDC Could Soon Turn to Startups," ADWEEK, February 2, 2004, p. 12.

Jeffrey L. Covell