Mark Penn has had a busy year so far, and the final stretch heading into the holiday period isn't looking any quieter. The founder and president of Stagwell oversaw the completion of a merger with agency network MDC Partners in August following a dispute that previously threatened to imperil the deal. With the combined offering squared away, the executive now has his sights set on a bigger international expansion for a company that's expected to generate $2 billion in revenue in 2021 and wields an employee base of 10,000.

"Right now, I think the Stagwell assets can hold up in any bid of any size in North America. We're trying to make that true of any bid globally," Penn said. "The biggest gap there is is coverage in some of the smaller marketplaces … In a lot of these developing markets, there have been a lot of new born-digital companies that there hasn't been an acquisition market for." 

Like much of the agency category, Stagwell has benefited from an advertising rebound in recent months that's helped offset some of the blow from the early days of the pandemic, when clients pulled back virtually across the board. In its last quarter before the completion of the MDC Partners merger, Stagwell, as a standalone unit, saw organic net revenue growth up 39.5% year-on-year to $181.8 million. The combined group saw GAAP revenue growth of 31.6% YoY to $555.2 million in Q2, per a financial breakdown shared by a spokesperson. 

Those are smaller figures than the legacy ad holding groups — Publicis Groupe, for example, notched $3.1 billion in net revenue in the second quarter — but Penn sees the upstart status as an advantage for Stagwell as it tries to avoid the past errors of competitors.

"We're a growing network. I think a lot of the big [networks] are saying, well, maybe I've got too much global network," Penn said. "I don't want to recreate some of the situations in the big holding companies where everybody became competitive against each other."

Eye on M&A

With a more unified organization and some fresh cash in the coffers, Penn said Stagwell expects to ramp up dealmaking activity. One major gear shift spurred by the COVID-19 crisis has been a premium on performance marketing, which will be one of the focus areas as Stagwell scopes out potential targets.

"We've gone from almost 100% brand marketing and a few infomercials to sort of 50% performance and probably 50% or less of pure brand marketing," Penn said. "The pandemic has sped it up because people are using more online shopping and doing more of their life online faster than they expected."

Other agencies see similar opportunities. Omnicom Group last week announced it was acquiring performance marketing firm Jump 450 to bolster its media services division. The New York-based shop will serve as the foundation for a new performance marketing platform and business unit within Omnicom Media Group. And Publicis in July bought CitrusAd, a software platform that helps marketers optimize their performance on e-commerce sites.

Regarding areas Stagwell is looking into, Penn pointed to companies that specialize in emerging marketplaces like Amazon, Walmart or Adobe.

"We continue to accrete our platforms on performance marketing and on basic digital transformation," Penn said. "At this point, what we're really looking for is, do we keep growing those networks? Do we keep adding on to those platforms?"

As it looks to differentiate, Stagwell is also turning to international markets it views as overlooked or underserved by Madison Avenue's old guard. Those include pockets of Latin America, Russia, Taiwan, China and the Middle East. Some of those regions are receiving interest from other companies trying to disrupt adland, including the highly acquisitive Accenture Interactive and Martin Sorrell's S4 Capital.

But a key aspect of Stagwell's global ambitions is an affiliate program launched at the start of the year that partners with outside agencies. The program is built on a "share the pie" thinking where Stagwell can provide services that fledgling businesses might not have the resources or expertise to manage, while Stagwell gains access to a more global client base.

In late September, Stagwell expanded a deal between its agency Allison+Partners and the Latin American group Grupo Garnier, which will rebrand its offices in eight markets with the Allison+Partners name. Around the same time, Stagwell struck an agreement with creative agency Enormous that aims to help it connect with consumers in India.

The affiliate initiative has announced 34 partners so far and looks to reach 50 by the year's end — and may also serve as an on-ramp for future acquisitions, according to Penn.

"It's a good way for people to get to know us and for us to get to know them," Penn said. "I think it's a little bit of an open field."

Network approach

Narrowing in on a performance mindset comes as some of Stagwell's more traditional creative brands experience headwinds. CPB, once a star of the agency world, has been roiled by a series of executive departures in recent months as its client roster dwindles. Penn suggested Stagwell operating a model based on networks of complementary agencies helps to safeguard the business in the cases where one arm encounters setbacks.

"CPB is part of Constellation. That includes 72andSunny but it also includes Instrument," Penn said. "By being able to bring a broader array of talent together, we believe that's kind of what wins in the marketplace."

Like other agency owners, Stagwell has also started to streamline and consolidate more of its holdings as it looks to stay agile. It recently combined its Assembly and ForwardPMX agencies into a single unit acting under the name Assembly Global.

"Working together is not an add-on, it's an essential feature of being part of Stagwell," Penn said. "We try to align the incentives that way so that people get out thinking of just their own individual company. I think that that's been working and it's been behind the success of a lot of recent pitches. Two years ago, we absolutely were not in that mode of thinking."

As Stagwell irons out some of the details of operating a more sprawling, complex network, Penn remains optimistic that the agency category will continue to reap the benefits of a recovery. One of the biggest questions hanging over the critical fourth quarter and holidays has been intense supply chain pressures that could impact client spending. Those factors have certainly had an adverse effect on sales expectations: Nike, for example, lowered its full-year sales forecast in September.

But Penn across two interviews reaffirmed a largely sunny outlook.

"The only thing that's changed is consumer confidence has soured a bit from where it was, even as the pandemic numbers are looking a bit better from what they were," Penn said. "I still think we're going to have a strong holiday season. The government's pumped a lot of money out there and a lot of people have been doing a lot of saving."