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MDC shareholders have been on a rocky ride this week, following CEO Miles Nadal’s decision to cash in on some of his holdings in the companyNeville Elder/The Globe and Mail

The failure of the biggest merger the advertising world has ever seen has not stopped industry observers from believing that more consolidation is to come. That has been a boon to the stock price of companies that own advertising agencies – potential targets, including Toronto-based MDC Partners Inc. and its chief executive officer, Miles Nadal.

But MDC shareholders have been on a rocky ride this week, following Mr. Nadal's decision to cash in on some of his holdings in the company. On Monday, the company announced the CEO's plan to sell 3.5 million MDC shares, bringing Mr. Nadal's stake in the company to 11 per cent, once the sale is complete.

Since July 29, 2013, the day after the $35-billion deal to combine Publicis Groupe SA and Omnicom Group Inc. was announced, MDC's stock has risen 33 per cent. With a wave of consolidation expected to sweep through advertising, as companies look to bulk up amid a shifting advertising landscape, the Toronto-based company was at the top of at least one analyst's list.

In the days immediately following the merger's dissolution, MDC continued to rise, until Mr. Nadal's sale was announced on May 12. Since then, it has dropped more than 13 per cent.

Analyst Richard Tullo questioned why the price fell almost immediately after the sale was announced, since institutional shareholders were told that the offering was oversubscribed, he said.

Mr. Nadal was not available to comment. In a statement earlier this week, the company said that Mr. Nadal chose to sell his shares "in connection with the portfolio diversification of his personal investments."

Mr. Tullo believes the depressed stock price means that MDC may be an even more appealing takeover target than it was before Mr. Nadal sold his shares.

"From an M&A point of view, the stock being down entices someone to come in and buy the company," said Mr. Tullo, whose firm Albert Fried & Co. does not hold MDC shares.

"The Publicis-Omnicom merger breakup creates a need for Omnicom to buy digital assets, and MDC is one-stop shopping. It's more of a target now," he said. "Omnicom merging with Publicis takes the need out of the marketplace for an acquisition. And frankly, MDC is a bonbon for [big agency networks]. It's not a big, strategic deal."

When Publicis-Omnicom's doomed merger was first announced, the companies' top executives said they needed their combined heft, digital expertise and worldwide presence to serve marketers in an increasingly globalized business world. The biggest multinational advertisers are asking their marketing services agencies to have an understanding of emerging markets, as well as the technological expertise to compete in a world where "big data" is shaping marketing messages and allowing companies to target consumers more personally.

Observers have questioned the rationale of global ad agency holding networks – which are already large and have digital investments – growing even bigger. But most also believe there are more deals to come. MDC shareholders are likely hoping that possibility will help their shares recover from this week's setback.

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