Miles Nadal has been on a buying spree. And the latest purchase by his Toronto-based ad agency holding company, MDC Partners Inc., is a shop that holds a spot in Canada's advertising history.
Southfield, Mich.-based Doner, one of the largest independent agencies in the U.S., once caught Mr. Nadal's eye with an iconic ad for Canadian Tire, called " Bike Story." The 1990 campaign featured a Canadian farm boy yearning for a red bicycle, and was produced when Doner still had a Toronto office, Doner Schur Peppler. On Wednesday, MDC announced it would take a minority stake in Doner, which is in its 75th – and final – year as an independent agency. MDC will ultimately increase that investment to a majority stake, Mr. Nadal told analysts on a conference call Wednesday.
According to MDC, Doner has more than $1-billion (U.S.) in client billings. The agency has 600 employees, and offices in the Detroit suburb of Southfield, as well as Cleveland, Newport Beach, Calif., and London. Its clients include Chrysler Group LLC, Coca-Cola Co., and The UPS Store. Terms of the deal were not disclosed.
The minority stake follows a series of purchases in recent years by MDC, and an active 2012 so far. In January, MDC acquired the firm RJ Palmer, which focuses on media planning and buying and branded entertainment. Last month, the holding company struck two more advertising deals, buying a majority partnership interest in media firm TargetCast, and striking a joint venture partnership with Brazilian agency Peralta. The buys reflect MDC's growing interest in media services. Doner is a creative agency that also does media planning and buying.
"We want to capture more and more of [our clients']marketing activities," Mr. Nadal said on the conference call.
MDC has more than 50 agency partners that it either owns outright or has a stake in the business, including noted creative agency Crispin Porter + Bogusky, KPS+B, and Anomaly.
The spate of acquisitions also led MDC on Wednesday to raise its guidance for 2012; it now anticipates $50-million more in revenue, which it now predicts at between $1.05-billion and $1.075-billion for the year, than its previous outlook. That would represent an increase of more than 11 per cent compared to 2011 revenue. MDC says it also brought in $40-million in new business in the first three months of the year, compared to just $8-million in new business in the first quarter of 2011.
But compounded by weak financial results in a couple of recent quarters, MDC's stock price has been struggling. Its shares have lost more than a third of their value in the past year. Its fourth quarter was weaker than expected – despite a 20.5-per-cent revenue growth (14 per cent of which was due to acquisitions), a sharp increase in operating costs drove earnings down considerably. Following the announcement on Wednesday, MDC shares closed 4.5 per cent higher.
"Our share price is a sensitive issue. We are obviously the number one performing stock over the last three, five, and 10 years. But in the last two years, you are correct, it has been disappointing," Mr. Nadal told analysts on the conference call. "… This is not a reflection on what we think has fundamentally happened to our business."