This story is part of Digiday’s Masters of Uncertainty series, a look at people and businesses at the center decisive media intrigues. Find the rest here.
Thanks to his powerful political and public relations talents – founder Mark Penn has a long history of running political campaigns behind the scenes – and an expected avalanche of $ 8 billion in political ad spending is expected to cover the United States, Stagwell Inc., the agency’s new-ish holding, is entering the New Year ready to succeed in what it can do.
But beyond political marketing bargains, the holding company has its eyes on an even bigger prize – expanding the openness of Stagwell’s offerings, both geographically by expanding into Latin America, Asia-Pacific and in the EMEA region, as well as by discipline, as the company loads on digital assets. In this way, it can continue to focus on its strengths, but also compete on a par with its holdcos competitors in its range of customer services.
“We seek to connect the consumer throughout [Stagwell] business ”for clients of its agencies, said Jason Reid, chief investment officer of Stagwell. “We have made secular bets: politics, communication, research. And now we are adding ancillary services to our portfolio to become a marketing services provider that can win contracts ranging from $ 20 to $ 30 million.
For the past six years, Reid, who manages an annual investment of between $ 50 million and $ 100 million, has been tasked with finding suitable candidates for the purchase and then negotiating and closing the deals.
Meanwhile, observers say Reid has forged an identity for Stagwell that sets itself apart from traditional competitors like WPP, as well as newcomers like S4 Capital. But these watchers also believe that Stagwell is always on the lookout for bigger jewelry to enhance his crown, especially when it comes to his media activities. And as it continues to grow, it must continue to prove that the assets it acquires can be greater than the sum of their parts.
“We are a different animal,” said Reid. “We’re not like WPP, because with them you’re basically selling yourself to a business with four or five competitors already in your space. We are creating a loose federation to win business locally.
Reid and Penn date back six years when they first met and worked together at Microsoft – Penn the chief strategy officer and Reid the senior director of corporate strategy. But when Penn became president and managing partner of Stagwell in 2015, he took Reid with him.
Since then, Reid and his team have closed some 35 deals for Stagwell, Penn said, including Code and Theory, as well as a decent media agency network of The Media Kitchen, Assembly, Gale Partners and ForwardPMX, managing around $ 5. billion dollars in media spending.
“Jason takes a thoughtful and highly intellectual approach to evaluating M&A for Stagwell,” said Penn. “He really has the number skills you need. On the other hand, making acquisitions is often a leap of faith, and I think he really understands the personal aspects of that as well. For the people [being acquired], this is usually the only transaction that they are going to do in their life and so it is important that we understand them, and they understand us.
Dan Gardner, CEO of Code and Theory, was not only acquired by Stagwell via Reid and his team, he also went on a hunt with Reid to expand Code and Theory’s ground in the communications landscape, acquiring specialty stores like TrueLogic and, more recently, Kettle. He declares himself a believer in their approach and their methods.
“Jason is very creative and flexible in his partnerships to figure out how to get the best deal,” Gardner said. “It’s about closing the deal and then structuring it so that incentives and performance align with business outcomes, whether it’s how to integrate certain centralized capabilities together, or the outcome of the business. economic performance, or even how to shift to a broader Stagwell perspective. He is very good at making sure the structure of the deal goes in the most efficient way for long term operation. “
The pace of Stagwell acquisition isn’t slowing down anytime soon. In addition to looking in Asia, the Middle East and Russia, Reid said Latin America is a particularly intriguing region to seek out digitally-edged stores to acquire. “Not only is it in similar time zones, but the talent pool is amazing there,” said Reid. “People grew up with their cellphones and the younger generation is so digitally driven. “
Stagwell knows it’s not the only holding company looking for stores to pick up. But Penn and Reid are convinced they have a winning approach. Both have dismissed S4 Capital and traditional holding companies as being a huge competition when it comes to finding new companies to buy.
“We’ve built a $ 2 billion network over the past six years that overshadows what [Sorrell] did, ”Penn said. “Our biggest competitor is usually the wandering private equity firm that thinks it knows something about space. They tend to pay more than what is appropriate. But then [the acquisition] targets tend to discover [PE firms] don’t have the strategic system that we have.
“We are usually not the first bidder, we are usually the second,” he added. “Because when someone reviews their statement, it won’t be the money they get. It’s gonna be their way of growing up. The total benefit of the agreement in four or five years may be much greater. “
An agency CEO, who observed Stagwell from afar but made several acquisitions himself, including having a former agency bought by a holding company (not Stagwell), credits Stagwell with the emphasis on relationships public and communications.
“Penn has been driving this interesting wave over the last few years, which was really PR-driven, but then went out and bought Code and Theory, one of the best in the business,” said the executive. “And they added a bunch of digital assets.”
But, added the CEO, “They have all these talented agencies that have become poor in their ability to grow, like Crispin [Porter & Bogusky]. And the media just isn’t a big part of their business – how do they approach that? What is the crown jewel in Stagwell? “
Jay Pattisall, chief analyst at Forrester’s global agency, credits Stagwell with at least trying to leverage more of his media assets by bundling them into one network. “It’s much more than what was Assembly by itself or Forward PMX by itself. The suit doubled their size in terms of purchasing power, ”Pattisall said. “What were once essentially two separate media agencies suddenly has the presence of a smaller but significant media network.”
Nevertheless, this crown jewel may not have been purchased yet. Whatever companies Stagwell buys in the future, Penn promises that there will be no duplication. “We’re not going to buy six copies of the same thing – we’re going to learn all the skills so that we can be the most effective marketing organization,” he said. “Strategically, after the merger, we’re going to look for acquisitions that really make sense in terms of business growth and individual needs. “
As Code and Theory’s Gardner will vouch, Reid and his team consciously avoid a model-based approach, in order to accommodate the singular elements of each acquisition. . “Other holding companies have a format for how they complete transactions. But Jason works so well together in structuring transactions, to achieve both business and human results. “