MDC Partners Loses One, Cliff Freeman Calls It Quits

by Joe Mandese, Feb 18, 2009, 8:36 AM

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MDC Partners, the Toronto-based agency holding company that has been using an innovative model to roll up sizeable stakes in some of Madison Avenue's fastest-growing agencies, has had its first major defection. Cliff Freeman and Partners, an agency founded in 1987 by renowned ad man Cliff Freeman, has bought it 20% stake back from MDC.

"I've always believed in the power of the CFP brand," Freeman said in a statement. "I was granted an opportunity to buy it back and, committed to the best interest of the agency and our clients, opted to do so wholeheartedly."

Freeman did not disclose the terms of the buyback, or specific reasons for the timing, but the agency has had a rocky road since selling a stake to MDC in March 2004.

Earlier this month, the agency lost its flagship account, sandwich chain Quiznos, after a spate of other recent account losses.

Late last year, the agency shook up its senior management team, replacing CEO Jeff McClelland with former BBDO Account Director Clayton Ruebensaal.

The Freeman defection is believed to be the first major split from MDC, whose other partner agencies include creative powerhouses like Crispin Porter + Bogusky and Kirshenbaum Bond Partners, as well as media agency The Media Kitchen.

MDC claims to be the ninth largest agency holding company in the world, and during a presentation at the UBS Media Week conference in New York in December, CFO David Doft said the company plans to double its market share this year, and would do so without making any major acquisitions.

MDC's growth engine has been its ability to take strategic stakes hot agencies while allowing their senior managers and founders to retain sizeable share as an incentive to grow their businesses even more. While MDS does not control 100% of the equity of its shops, it does control "100% of the balance sheet," Doft said, adding that it was moving from a relatively passive "holding company" model to more of an "operating company."

"We are deeply involved in the day to day decisions of our companies," he said, adding that the focus has been on how to ensure that they drive greater revenues.

Although MDC is known for the hot creative shops it has acquired, Doft said its current mix derives only 30% of its revenues from "traditional advertising," and that 70% of its business comes from "non-traditional media and marketing services." Nearly half - 45% - of MDC's revenues now come from direct marketing or digital media services, he said, a figure believed to be much higher than that of other major agency holding companies.

MDC also appears to be evolving from an acquirer of strategic stakes to an active developer of promising businesses. Last year, MDC backed the spin-off of Varick Media Management, a new advertising network and exchange model, from The Media Kitchen.

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