Miles Nadal built MDC into $3 billion holding company by acquiring one partnership after another. In 2012, he tipped the scale, making him MEDIA’s 2012 executive of the year.
Miles Nadal isn’t exactly Madison Avenue’s ultimate outsider, but he’s close. The Toronto-born financier grew up in a two-bedroom apartment, didn’t finish college, and financed his first business with a $500 advance on a Visa card. That was 1980. Today, MDC Partners is the eighth largest agency holding company in the world, with $3 billion in billings.
Always controversial, the 54-year-old Nadal’s entrepreurial strategy has been to use debt to finance partnerships, or partial acquisitions, rather than the conventional approach of purchasing them outright. MEDIA named him Executive of the Year because that strategy has drawn so much attention, following a buying spree that included TargetCast (MEDIA’s Independent Agency of the Year, see p. 26) and RJ Palmer. As the company moves into its digest-and-reduce-debt mode, MEDIA’s Steve McClellan and Joe Mandese met with Nadal in his New York office, taking in his sweeping views of both Central Park and the media landscape.
This was a year of big acquisitions—TargetCast and RJ Palmer. What makes you want to buy a company?
We have always prided ourselves on our ability to identify opportunity. About three years ago, when Horizon Media started to really grow, as was our business, The Media Kitchen, I thought, good, there’s obviously some niche not being serviced by big multinationals. So, we started talking to TargetCast. We were talking to Bill Koenigsberg at Horizon. Some things started to come together.
All of a sudden, there was an opportunity to shape this. So, between TargetCast and RJ Palmer, and then Doner, we had the real makings of a media business. We saw we could build a partnership-like culture, and make Maxxcom an entrepreneurial firm that looked at all aspects of media. It was the same way we did it with advertising, with public relations, and with direct response. Media was a great opportunity.
We’ve always been contrarians. And it helps that we don’t have any legacy issues. It’s given us an advantage to be able to build something in the media business differently today than you would have 10 years ago. There are a lot of interesting firms that are terrific and are growing very rapidly. They’re not the biggest firms, but if they can help us differentiate our offerings, broaden our capability and expertise in industry or geography, or technologically, we’re very receptive.
Other holding companies are investing a ton of money into new technology, to maximize clients’ sales. What makes you special?
Everybody says, “I’m investing in technology, I’m investing in technology, I’m investing in technology.” So, I ask a very simple question, “What tangible results do your clients have to show for all the investments you’ve made?” You should have greater return on market investment. You should have better solutions that are more targeted. There should be less waste. I don’t see it yet.
I think, by the way, partnering in new technology is, most of the time, more cost-effective, and has better results than trying to create it yourself. The most critical thing for us to get right is the people who know how to identify the trends, where the world is going. There’s a famous expression about — there’s this guy named Wayne Gretsky, he used to play hockey. I don’t know if you know about this…
We know about him.
Gretsky always knew where the puck was going. And I don’t think there’s a lot of that at this point in time. If you’re investing in all this technology, then you should be able to deliver better performance, better results, a higher return on marketing investment, or less money. There’s got to be some combination of those things.
So, do I need to have $50 billion worth of billings to compete in the spaces we’re in? No, not at all. I’m not trying to get the global Chrysler media business. There are four or five firms I know that beat themselves into the ground to try and get that business. We’re going after areas that we think are not well served. That business will grow. And, over time, we’ll get more and more share of market, which has really been our philosophy. Our organic growth is double or triple the rest of the industry. Our media business is growing faster than the rest of our business, and it’s more profitable.
Does this model really hold up in terms of scale?
My fundamental belief is that we have sufficient scale to compete on any piece of business in our size, and to be able to deliver at least as cost-effective results in buying as anybody else. In the digital space or in the online auction space, we are as good, if not better, than they are, because it is run by entrepreneurial people who are always looking for that edge, who are trying to find that niche.
Service has become a big thing, as well. Clients want to be educated more. Clients, more and more, want more high touch, more involvement, to understand the changes that are happening.
Let’s go back to this three-year-ago epiphany. Why did you think the time was right to move into media?
MDC needed to be mature and to get to a scale where we had a credible offering that people would believe in. We then needed to have enough scale that we could afford to invest and acquire and build on a platform. And you need the world to say, “As long as you’re big enough that you can help us, we’re receptive to doing more business with you. And, like I said, I just looked. I mean we’ve watched Steve Farella at TargetCast for a long time, and we’ve always looked with great admiration and regard for him. We’ve always been very close to Bill Koenigsberg at Horizon. And there are others. You know, there’s room for everybody.
All we’re trying to do is just get an incrementally larger share of the market. But it’s a little deceiving. The market is a $200 to $250 billion dollar market in America, and we have 2 percent of that. So, if we could get two and a quarter percent, that’s a lot of money.
So media levels the playing field for you?
Yes, we were at a competitive disadvantage. I think that’s a very good point. We would not pitch an integrated offering, and that put us at a disadvantage.
How would that work now? Martin Sorrell put together a team to do an integrated offering across wire and plastic products. Is that what you’re going to get to?
We do it now. We target. Our cross selling (I hate that word), or our integrated partnership model is the most effective in the industry. Because people actually want to work together. They don’t work for us, MDC. Even if it’s an MDC pitch, it’s really a collaboration, a partnership.
So will you be more like a VivaKi in that sense, where you bill the best-in-class resources that everybody could share?
I don’t know what other people are doing. We’re trying to find areas where our investment is in differentiating our overall offering, but we have duplication. We should put the resource together so that we are best in class, instead of having four fragmented pieces that are each doing the same thing. We’re identifying those as we speak.
We can afford to be patient, because the firms individually are very successful, so every one of these modifications are going to make them more efficient. More importantly, I think it will enhance the durable competitive edge we have by having the best in class in an area, and probably higher in recruiting even better talent.
What about friction in the business, when taking business from one partner and moving it to another creates tension?
We make good on the differential. If you say to people, “You need a chief growth officer,” and they say, “I can’t afford it,” I say “I’ll hire the person for you. I’ll subsidize that.” It’s the right thing to do. We’re always making decisions, because we look at the long-term, and they manage to the short-term. All the time we say, “This is the right thing for the company and for your business.” But, you know, people say, “Look, I gotta make my numbers. I can’t just do that.” I say, “Fine. You go ahead and do that. I’ll pay for the first year.” And we do that all over the place. That’s a very different model than anybody else in the other organizations, because they say, “Well, you’ve got to find the money.”
The reality is that you want people to look long-term.
We’re trying to do what would be in the collective best interest of the organization.
In our organization, people work collaboratively. Target Cast and RJ Palmer? They are happy. The economics are beneficial for everyone because you don’t want to have winners and losers. That’s not a good culture. If there’s a conflict, one refers to the other. Our partners want to see the overall partnership win, but they also want to see the individual partners win.
You’ve always been in the media services business through your agencies.
How much of your portfolio is in media? And how much do you think it will be, going forward? Will you be spending more of your investment capital in media?
Absolutely, more. Let me think about this for a second. It’s probably between 12 and 15 percent of our revenue. It’s probably $150 to $200 million dollars in overall media. It will be 25 percent.
So, how big do you want to get in three years? Or is that the wrong question?
Financial results are a byproduct of excellence. So, if the industry grows 5 percent, we’ll grow 10 percent or 15 percent. We’ll always grow double or triple the industry, if we can keep finding great people and great companies, and help our clients grow. It’s not scientific.
When people set arbitrary financial targets, they inevitably do something big and dumb. Always. That’s how Time-Warner and AOL got together. “Oh, we want to be big!” That wasn’t good value creation. You’ve got to think of how we can continue to differentiate ourselves.
We’re never going to be the biggest firm in the world. We don’t want to be. We want to be known as a firm that does great work as a culture, where the most successful entrepreneurial people work and they love what they do. And these people, we really care about our businesses. They really are our partners. They really are focused on driving results for us.
Horizon Media would make a great combination with you guys.
I’ve been talking with Bill for the longest period of time. I think he’s a spectacular entrepreneur. He’s an extraordinary businessman. And he’s one of the most likeable guys in the world. But who knows? Bill is a very successful and independent-minded media executive.
There will be competition, if he decides to sell.
Yes. And I don’t know what other holding companies will do. I don’t know what works at WPP, because I don’t know what their strategy is. I don’t know what works for Maurice [Levy, CEO. Publicis Groupe], or for IPG. I know what works for us. You’ve got to be true to what works for you. I think where companies run into difficulty is if they amend their strategy because they say, well, that guy is going to get it, or this one is going to get it. I’d sooner do nothing than do something outside the boundaries.
The one good thing about doing this for 32 or 33 years, we’re pretty firm about what we do, and why we’re going to do it, and why we won’t. Now, we’re acquiring people and we’re growing our business organically. We are aggressively winning new business all over the place. We’re having the best year in the company’s history of new business wins. What you realize is that it’s a long game.