$1+ per share annually to equity value from free cash flow generation which will only accelerate with growth. Catalyst. Analysis assumes full conversion of $153MM of pref. Mgmt. Ann-Christine Diaz MDC Partners’ board of directors approved a merger agreement with The Stagwell Group in a deal that has been anticipated since its initial proposal in June. The management team for the combined company will consist of existing executives from both MDC and Stagwell. (function () { by Aleda Stam. The holding company and Stagwell Group announced that they reached a preliminary, non-binding agreement in principle for a potential merger of the two companies. MDCA Partners Inc (NASDAQ:MDCA) memo for the month of January 2020, discussing MDCA’s proposed merger with The Stagwell Group LLC. Rev split: 42% digital services, 40% marketing communications, 13% research and insights, 5% content and media. We think that in the short term MDCA shares are worth $4.50-5.00 (~60%-80% higher). MDC Partners Inc. (NASDAQ: MDCA) concerning potential violations of the federal securities laws and/or breaches of fiduciary duties relating to its merger with Stagwell Media LP. Political ad spend cycle in 2022. His Baupost hedge fund has achieved outstanding returns for investors over the years and currently manages just under $20 billion in client money. MDCA stand alone: 2020E: $1.2BN revenues, $180MM of EBITDA in 14 countries with 4,900 employees. 23 agency company with 2019 revenue of $627 million. Yahoo Finance: Mark Penn on the MDC Partners-Stagwell Group combination January 14, 2021. Mark Penn’s Stagwell Group Proposes Merger With MDC Partners Penn took over as MDC Partners CEO following a 2019 investment Stagwell Group's proposal argues the merger would help … Stagwell ranked as the world’s No. $200MM+ of pro forma FCF generation in 2021. Activate your account. The combined company would see $35 million in synergies from the deal. Liquidity Considerations: Pro forma, Stagwell will own approx. 8,675 employees across 23 countries with 1/3 of revenues attributable to digital services (growing 10-15% annually). Pursuant to the Transaction Agreement, the board of directors of the … The Stagwell Group’s most common sectors for investment are marketing (59%) and business services (17%). Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Increased investor awareness, better understanding of higher growth heretofore private Stagwell assets, sell side coverage (numerous analysts covered MDCA pre-2019), analyst day, etc. MDC Partners is the parent of agencies like CPB, Anomaly, 72andSunny, Doner and Instrument. “Scale means a lot in today’s ecosystem,” said Greg … 2025E EBITDA: $510-570MM assuming margins of 17-19% (Rubicon Capital assumptions). Long-term equity value does not consider further deleveraging which could add approx. Jacob lives with his wife and four kids in Passaic NJ. Stagwell was borne out of an anchor investment from Steve Ballmer who Penn worked with while he was at Microsoft. 3 hours 29 min ago, By The Stagwell Group late today proposed a merger with MDC Partners in a move that would combine two firms led by Mark Penn into a $2 billion agency group. MDC Partners and the marketing consultancy Stagwell Group, both headed by Mark Penn, have agreed on a merger, according to the two companies. Stagwell Media LP (“Stagwell”) announced today its combination (the “Proposed Transaction”) with MDC Partners, Inc. Stagwell and MDC hope to complete the deal in the first half of 2021. Stagwell also owns preference shares that can be converted into MDC common stock. Key digital assets include Code and Theory, ForwardPMX, Harris and National Research Group. Goldman Sachs, an existing MDC investor, would continue to hold preference shares, though MDC and the investment bank agreed to renegotiate terms of those shares as part of the merger transaction. 6. Penn has led MDC Partners as CEO since March 2019 after Stagwell, which he leads as managing partner, invested $100 million in the holding company. CEO Mark Penn has a strong track record of creating value with advertising and digital assets. While getting to $4.25 a share of value was a bit of contorted calculation, the stock shot up to the high $2s on the announcement. jo.type = 'text/javascript'; Under Penn’s tenure, top line growth was reinvigorated and MDCA generated significant cash flow. Stagwell would receive 335.5 million MDC … - 1 week 2 days ago, By Right now, NRG operates as an … The Firm’s most common … Stagwell Group organic revenue spikes 59.9% in Q4. 2025E Revenue: $3BN from 9% ann. We have been impressed with Penn’s tenure as CEO since he took over the Company. As evidenced last year, management is adept and managing the business through economic cycles. Penn added the post of MDC chairman in April 2019. This write up will detail the proposed transaction and provide a valuation framework that we feel justifies a value for MDCA that is significantly higher than where the stock is currently trading ($2.75). })(); ValueWalk.com is a highly regarded, non-partisan site – the website provides unique coverage on hedge funds, large asset managers, and value investing. shares (held by Stagwell and GS) at $5. MDC Partners Chairman-CEO Mark Penn, currently managing partner of Stagwell Group, is set to continue on as the chief executive and chairman of the combined company. Mark Penn — chairman and CEO of MDC Partners — joins Yahoo Finance Live to discuss MDC’s recent merger with Stagwell Group… Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. Acceleration of top line growth should give way to multiple rerating. - By MDC’s stock closed at $1.17 on June 24, the day before Stagwell unveiled a merger proposal. Stagwell … MDCA Partners Inc. (“MDCA” or the “Company”) has been written up in the past which provides some good background of the Company. © 2011-2021 VALUEWALK LLC. Ad Age and Creativity Staff MDCA Partners January 2020 Memo: Merger With Stagwell, Please speak to a licensed financial professional, MDCA Partners January 2020 Memo: Merger With Stagwell [Valuation Analysis], Possible timelines for third coronavirus stimulus checks, 2020 Economic Growth Was The Worst Since World War II, How much of a down payment do you need? The companies said a management team for the merged company would be formed and “consist of existing executives from both MDC and Stagwell.”, “This is a new day for MDC and Stagwell,” Penn said in a statement. Stagwell Group organic revenue spikes 59.9% in Q4. Stagwell and MDC said the merged business would have estimated 2020 worldwide pro forma revenue of $2.065 billion to $2.075 billion. The Stagwell Group initially proposed the merger in June. Costs are largely variable and can be flexed depending on market conditions. Recovery off depressed levels should provide revenue tailwinds into 2021/2022. Save it to your desktop, read it on your tablet, or email to your colleagues, Q4 2020 hedge fund letters, conferences and more. Stagwell Group and MDC Partners have ironed out a definitive merger agreement to form what CEO Mark Penn calls a $2B “transformative” marketing services company with 8,600 employees … Pro forma cost synergies seem quite reasonable at ~8% of EBITDA. Stagwell … - 3 days 13 hours ago, By thinks the combination could generate $90-150MM of incremental annual revs over time. “Together, they unleash precisely the right talent and technology to create a transformative marketing services company offering scaled creative performance.”, Following the deal’s closing, the companies said what they are calling “New MDC” would trade on Nasdaq under the same symbol as MDC does today, “MDCA.”. We see a unique opportunity to own shares in a financially stronger company with accelerating growth from digital marketing initiatives led by an accomplished CEO with fully aligned interests to create material shareholder value. ALL RIGHTS RESERVED. Margin estimates are in line with near term projections and industry peers. top line growth (5% organic, remainder from M&A and new products). Cheap on an absolute and relative basis: 24% FCF yield and at 6x EBITDA, two turns cheaper than trading peers. Collaborative by design, Stagwell … Lindsay Rittenhouse is a reporter covering ad agencies. Transaction is deleveraging. This write up focuses on the proposed merger of MDCA with The Stagwell Group LLC (“Stagwell”), a digitally focused holding company of marketing companies which also was the largest owner of MDCA … var jo = document.createElement('script'); Press Release: On December 21, 2020 MDC Partners and Stagwell Media LP announced they have entered into a definitive transaction agreement to combine their respective businesses, uniting the award-winning talent of MDC with the advanced technology platform of Stagwell to create the transformative marketing company that today’s marketplace demands. However following COVID-19, MDCA’s top line was hit considerably with Q2 organic growth down 26% (rebounding 9% sequentially in Q3). Merger in the works. https://adage.com/article/agency-news/mdc-stagwell-come-terms-merger/2302746 Mission: Providing a framework to improve your investing PROCESS, while collecting newsworthy information about trends in business, politics and tech areas. Stagwell would control the merged venture, but more than half of revenue and employees would come from MDC. Publicly traded comparable trade around 8x EV / EBITDA. Are you a print subscriber? The fine print: The merger is still “subject to various approvals, including a thumbs up by a majority of … jo.id = 'FJVoiceFeed'; The merged company would remain headquartered in New York with “a significant presence in Washington D.C.,” according to the companies. MDC and Stagwell announced their planned deal after the market closed Monday. Stagwell proposes merger with MDC Partners. The company has made strides in its merger with MDC Partners with MDC's board approving the transaction in December. … In early 2019, Penn made a $100MM investment in MDCA through Stagwell and assumed the role of CEO. With the longer-term plan management has laid out we think the stock easily can be worth $8-10 (190% - 260% higher). We won't send you spam. Close. I also own a few grams of Gold and Silver. - 1 day 10 hours ago. The new brand, part of the Stagwell Group, combines advanced capabilities across North America, EMEA and APAC, and brings a unified global vision for technology and performance that … Stagwell is evaluating remedial actions to address the issue. Penn has demonstrated this ability as CEO of MDCA by marrying traditional MDCA advertising with Stagwell digital assets to generate key client wins including J&Js consumer business taken from WPP after a multi-decade relationship with that firm. Adrianne Pasquarelli jo.src = 'https://www.financialjuice.com/widgets/voice-player.js?mode=inline&display=1&container=FJ-voice-news-player&info=valuewalk&r=' + r; Key assets include 72andSunny, Anomaly, Crispin Porter Bogusky, Doner and Instrument. Pro forma net leverage ratio decreases from 4.2x to 3.4x (assuming full synergy capture). Mark Penn on the MDC Partners-Stagwell Group merger January 12, 2021, 8:22 a.m. Mark Penn — chairman and CEO of MDC Partners — joins Yahoo Finance Live to discuss MDC’s recent … After the initial offer, the board formed a special committee and retained an investment bank to review the transaction. $2.0BN 2021E => 2025E $2.6BN (organic) + 75MM new digital rev streams, $325MM M&A growth = $3BN of total revenues. Stagwell Media LP ("Stagwell") announced today it has proposed a combination with MDC Partners, Inc. ("MDC"). Stagwell agencies include creative consultancy Wolfgang, as well as Code and Theory. Klarman: You can learn more from a losing trade then you can a winning one, Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Stagwell and affiliates are expected to own 79% of the common equity of NewCo following the transaction. Pro forma will manage $4.4BN of media spend. Subscribe to ValueWalk Newsletter. Given the variable nature of costs in the business, management responded swiftly to the pandemic and offset 86% of the revenue decline with 110% of cost reductions and remained solidly profitable. Long term management estimates contemplate 9% annual revenue growth (5% organic). The company has made strides in its merger with MDC Partners with MDC's board approving the transaction in December. document.getElementsByTagName('head')[0].appendChild(jo); In a move designed to expand global marketing capabilities, the PMX Agency and Forward3D have “united” to become ForwardPMX, which will then be a part of the Stagwell Group. This write up focuses on the proposed merger of MDCA with The Stagwell Group LLC (“Stagwell”), a digitally focused holding company of marketing companies which also was the largest owner of MDCA shares prior to the proposed combination. Existing MDCA shareholders (including Stagwell) will receive 26% of the common equity of the combined company. MDC shareholders will receive 26% of the combined company’s common equity as part of the merger. Posted by ... About Stagwell Group The Stagwell Group is the first and only independent, digital-first, and fully-integrated organization of size & scale servicing brands across the continuum of marketing services. The Stagwell Group, which acquired the National Research Group from Nielsen in 2015, has now purchased assets from Nielsen that deal with TV testing. December 21, 2020 MDC Partners and marketing consultancy Stagwell Group, both led by Mark Penn, have agreed to merge, according to the two companies. NewCo: 2021PF: ~$2.1BN of revs, $355-370MM (including $30MM of 3-year cost synergies, 90% captured by year two). MDC, with 2019 worldwide revenue of $1.4 billion, ranked as the world’s 15th largest agency company in 2019, according to Ad Age Datacenter. 2 U.S. burger chain, is back with a big March Madness play, CPB Global CEO Erik Sollenberg to depart agency, Stagwell Group proposes merger with MDC Partners, How to turn a dollar stock into a $4 stock: Stagwell's staggering deal for MDC, Burger King’s snafu puts focus on the danger of using shock value as a social media strategy, Agency sells Burger King merch that flips the script on chain's flawed International Women’s Day campaign, - Read additional free articles each month, - Comment on articles and featured creative work, - Get our curated newsletters delivered to your inbox. Highly free cash flow generative out of the gate ($200MM+ in 2021E). You may unsubscribe at any time. The merger follows a $100m investment made by Stagwell last year into MDC through the purchase of $50m in common shares and $50m in non-voting convertible preference shares. Based on June 2020 staffing levels, the combined venture would have about 8,675 employees across 23 countries; 4,900 of the employees would come from the old MDC, and the rest from Stagwell. Since his tenure as CEO of MDCA, Penn has taken meaningful structural costs ($40MM+ on EBITDA of ~$180-190MM) out of the business through real estate and G&A rationalization while refocusing the business by cross pollinating assets and leveraging internal resources that resulted in MDCA winning several significant new advertising mandates (Audi, BMW, Coca Cola, Budweiser, J&J consumer, Nike, etc). With the end of year timing of the deal announcement and a current lack of sell side coverage, we view MDCA shares as substantially mispriced. Penn's Stagwell Group Proposes Merger with MDC June 26 2020 The Stagwell Group, owner of the Harris and Harris Poll brands, has proposed a merger with marcoms group MDC Partners, … December 22, 2020 Marketing services holding company MDC Partners and private equity firm Stagwell Group have reached a definitive agreement to make their proposed merger official. 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