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The Old Mad Ave, Built Anew?


Miles Nadal juggles two BlackBerrys and four cell phones. (Plus two backups.) You may forgive him since his company is rather diffuse. Nadal's business, which is based in Toronto and has offices in New York while he resides in the Bahamas (got all that?), is MDC Partners (MDCA). MDC, founded in 1980, has amassed a crazy-quilt of 40 companies that individually focus on specific aspects of the marketing ecosystem: public relations, creative agencies, design, brand strategies, and media buying. It focuses on the boutique rather than the big-big. MDC's calling card is the star creative shop Crispin Porter + Bogusky, a Miami ad agency that, thanks to its renowned work for Burger King and a host of others, has, despite occasional misfires, remained hot pretty much since the turn of the century.

These days, Nadal is expanding MDC's portfolio through a novel strategy that he calls "lift-outs"—creating startups by backing talent lurking inside other ad companies. He has made four such deals this year, most recently in mid-August with an as-yet-untitled New York agency aimed at the Hispanic market that launched with two executives from Young & Rubicam agency Bravo and one vet of independent agency Vidal Partnership. Previously in 2007 came lift-outs with a group of Canadian employees of Publicis Groupe (PUB) who now make up Push Interactive, the digital arm of MDC agency ACLC, and with refugees of Interpublic Group's (IPG) Futurebrand, who now toil for Nadal at MDC strategy-and-branding firm Ito Partners. While marketing and ad mavens fret and obsess over clicks, metrics, and bang for the buck, Nadal is selling creativity and cool—or, more precisely, his company's understanding of both. Another selling point: Those involved in his lift-outs—and acquisitions, for that matter—typically maintain significant equity stakes in their companies. "You are either perceived to be innovative and enterprising as an institution or you're not," says Nadal. "We sort of want to be the Goldman Sachs (GS) of marketing services."

DEPENDING ON WHOM YOU TALK TO, a certain glamour still clings to the world of advertising. But there's a reason why the AMC series Mad Men seems as elegiac as a sad song. Those glory days are almost a half-century old, and the ad world long ago consolidated into massive conglomerates. The aggregate revenues of WPP Group, Publicis, Interpublic, and Omnicom Group (OMC) last year approached $35 billion. (As with big media companies, their track records sometimes argue against the wisdom of chasing bulk for its own sake.) There is also a new wave of renowned independent creative agencies, including Strawberry Frog, Taxi, Droga5, and Anomaly. Somewhere between these poles lies MDC, which last year posted revenues of around $425 million. But it has a rep that still makes it attractive to wild-minded creatives and entrepreneurial types alike. "I don't love the holding-company thing," says Ito's David Melançon. (MDC is by definition a holding company, but Melançon is referring to the giants.) "With Miles, I get both financial support and a network of like-minded people to grow the business with."

Lift-outs are relatively new to MDC, and the companies Nadal has started this way provide no more than 6% of MDC's revenues. And it's by no means proven that Nadal's off-center strategy to create a marketing colossus will succeed. MDC's stock has outperformed the big ad conglomerates in recent years. But its market valuation, when expressed as a multiple of annual company earnings, still trails its sector. In an August report, BMO Markets analyst Jeff Tkachuk was lukewarm on MDC, citing "good momentum" but expressing concerns that profits were not growing anywhere near as quickly as revenues. Nadal has shown that his strategy can attract talent. (MDC also made four outright acquisitions, or "tuck-unders," in Nadal parlance, this year.) What he's selling—that talent matters above all, that the ad industry should still lead with its ragged edges and fevered ideas—is a compelling narrative. Now he needs to demonstrate it actually works.

For Jon Fine's blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia

By Jon Fine


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