Mark Penn’s Stagwell Group Raises $260 Million

Stagwell Group LLC, the digital marketing investment group founded by Mark Penn, a former Microsoft Corp. chief strategy officer and adviser to Bill and Hillary Clinton, has raised $260 million in funding from private-equity firm AlpInvest.

Mr. Penn, also previously an executive at ad giant WPP PLC, launched Stagwell 2015 with $250 million in funding, including investment from former Microsoft Chief Executive Steve Ballmer. Since then, Stagwell has made 17 investments in marketing and communications, research and healthcare agencies as it sets about building an alternative for marketers from the traditional ad-agency holding company model.

AlpInvest is taking a significant holding in the Stagwell Group but the original investors will continue to hold a majority interest in the company and no change of control or management has occurred as part of this transaction, according to a person familiar with the matter. Further details about the deal were not disclosed.

Stagwell is on track to generate $400 million in revenue this year, up from around $275 million last year, according to Mr. Penn, who says the company is also profitable.

Its portfolio includes the research company Harris Insights & Analytics, performance-marketing firms Forward 3D and PMX, public affairs agency SKDKnickerbocker and digital creative agency Code and Theory.

Mr. Penn said initially the companies operated separately from one another, but as Stagwell achieves scale across its services it is beginning to put those agencies together as more of a network. Recently five of its agencies were moved to two floors of One World Trade Center in New York.

The Stagwell Group is continuing to hunt further acquisitions, particularly in the area of digital media.

“We look mostly at newer companies, although we have had some very good success with Harris and NRG [National Research Group] from [measurement firm] Nielsen,” Mr. Penn said. “We are certainly going to look at anything to see whether or not it can be updated or modernized effectively.”

Other former advertising executives are also building alternatives to the agency holding companies. Former WPP Chief Executive Martin Sorrell created a new venture earlier this year called S4 Capital, which made its first acquisition in July: Netherlands-based digital production agency MediaMonks. David Jones, the former CEO of Havas, founded the “brand tech” group You & Mr Jones in 2015. It has invested in companies including Pinterest and ”Pokémon Go”-maker Niantic and has majority stakes in firms including crowdsourced content network Mofilm and 55, a data company.

The traditional agency business has faced a number of challenges in recent quarters, including increasing competition from new upstarts and consulting firms, changing consumer habits and large advertisers moving to cut costs.

In response, advertising holding companies are moving to simplify their structures to make it easier for clients to tap talent across their businesses. WPP and Omnicom have recently said they are assessing their portfolios, including disposing of non-core assets.

See the original article here in the Wall Street Journal

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