Stagwell Media has just completed a $260 million capital investment from private equity investor AlpInvest Partners to support its on-going acquisition of marketing and research companies.
This marks the first outside investor in the group since the company's 2015 launch by Mark Penn and Steve Ballmer.
To date, Stagwell Group has completed 17 investments and is on track for more than $400 million in consolidated net revenue this year. Penn says the group will likely announce its next acquisition later this month.
The new investment funds are earmarked for what Penn calls his "Noah's Ark strategy" with "one or two of each kind of agency" in Stagwell's portfolio.
Thus far, the Stagwell portfolio includes healthcare and consumer shop Scout, research leader Harris Insights & Analytics, performance marketing firm PMX Agency, creative digital leader Code and Theory, strategic communications agency SKDKnickerbocker, creative shop Wolfgang, entertainment research innovator National Research Group (NRG), and communications agency Wye Communications, among others.
"We are light in media and B2B" shops, Penn says.
Most agencies are what Penn calls "second-phase brands," comfortably established between mom-and-pop start-ups and "third-phase" growth companies. The fourth stage in his acquisition strategy represents industry leaders, which aren't typically eyed as potential targets.
Stagwell seeks agencies with $30 million to $50 million in annual revenue, proven client rosters and strong leadership teams, all centered around digital-centric frameworks, says Penn.
Penn says he’s not a “micromanager” and his holding company’s decentralized approach helps acquired firms deliver their “full potential in a digital-first world,” unlike other more traditional holding companies.
Stagwell's leadership team tries to keep a "low profile." They meet with agency managers on a quarterly basis “but we leave them alone unless there are major problems,” he explains.
He cites WPP — and its former chief Martin Sorrell — as an example of what transpires when "financials" wield too much power over the creative side. "Problems happen when you have too many lawyers and accountants running talent companies," he says. (Penn was a cofounder of of market research firm Penn Schoen Berland, which he sold to WPP in 2001.)
Penn admits he is "closely following" the situation surrounding MDC Partners after CEO Scott Kauffman mentioned to investors that his company is open to disposing certain assets. That said, Penn doesn't specifically covet any one MDC shop at this time.