Stagwell Inc. · NASDAQ:STGW
Stagwell — MDC Partners — Merger or Acquisition (July 2021)
37 slides from Stagwell's merger presentation, Jul 14, 2021
Slide 1: July 2021
July 2021
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
Cautionary Statement Regarding Forward - Looking Statements This communication may contain certain forward - looking statements (collectively, “forward - looking statements”) within the meanin g of Section 27A of the U.S. Securities Act of 1933, as amended and Section 21E of the U.S. Exchange Act an
Slide 3: Executive Summary
2 Executive Summary Rationale Transaction Affords MDC Shareholders the Best Opportunity for Value Creation Through a Meaningful Stake in a Well Positioned Company ▪ MDC shareholders will have a meaningful ownership stake in a scaled company that is well positioned in the fastest - growing digital ma
Slide 4: Overview of MDC
3 $0 $5 $10 $15 $20 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 $5.25 Overview of MDC KEY STATISTICS Unaffected Current Market Value ($M) $87 $427 Enterprise Value ($M) $1,201 $1,541 2020A GAAP Revenue $1,199 2020A Net Revenue $1,023 2020A Adjusted EBITDA $177 % Margin (based on Net Revenue) 17% 2020
Slide 5: Overview of The Stagwell Group
4 Overview of The Stagwell Group KEY STATISTICS 2020 Net Revenue ($M) $ 656 2020 Adjusted EBITDA ($M) $ 148 % Margin (based on Net Revenue) 23% 2020 NET REVENUE BY SEGMENT ▪ Stagwell Group is a digital - first, technology - enabled and fully - integrated marketing consultancy ▪ Network consists of 2
Slide 6: The MDC Independent Special Committee
5 The MDC Independent Special Committee ▪ The Special Committee was formed the same day that Stagwell and Mr. Penn indicated an interest in combining MDC with Stagwell ▪ The Special Committee’s composition consists of independent directors who have experience with M&A and have operated completely in
Slide 7: Timeline of Key Events
5.00 4.00 3.08 4.35 5.0 6 Timeline of Key Events September 20, 2018 MDC announces process to evaluate strategic alternatives 2018 2019 2020 2021 March 15, 2019 Stagwell invests $100M in MDC and Mark Penn is named CEO. Stagwell was the only bidder out of 34 parties as the stock traded at 52 - week lo
Slide 8: Transaction Overview
7 Transaction Overview Terms ▪ All - stock transaction in which MDC will issue to Stagwell equity interests equivalent to 180 million common equity interests in exchange for Stagwell’s operating businesses 1 Pro Forma Ownership ▪ Pre - Transaction holders of MDC Class A and Class B shares will recei
Slide 9: Indaba's Ill-Founded Opposition Puts Great Transaction at Risk
8 Indaba’s Ill - Founded Opposition Puts Great Transaction at Risk ▪ Despite extensive negotiations with Stagwell by the independent Special Committee, Indaba has expressed disappointment in the transaction economics and governance structure ▪ Indaba’s opposition is bereft of a recognition that MDC
Slide 10: Transaction Affords MDC Shareholders the Best Opportunity for Value Creation
5.00 4.00 3.08 4.35 5.0 1 Transaction Affords MDC Shareholders the Best Opportunity for Value Creation Through a Meaningful Stake in a Well Positioned Company STRICTLY CONFIDENTIAL
Slide 11: Strategic and Business Benefits of the Transaction
10 Strategic and Business Benefits of the Transaction Rationale Enhanced Market Position ▪ Greater scale with significant capabilities and participation in fastest growing segments of the marketing and advertising bu sin ess ▪ Targeting 5%+ of annual organic revenue growth ▪ Almost tripling high - g
Slide 12: The Combination is Transformative to MDC's Business Mix
11 Greater contribution from high - growth digital services revenue (% 2020 Net Revenue) Advertising 55% DIGITAL SERVICES 14 % Media 7 % Other 7 % Advertising 31% Marketing Comm. / PR 16% DIGITAL SERVICES 38% Media 5% Other 4% Research 6 % Marketing Comm. / PR 16% (% 2020 PF Net Revenue ) The Combin
Slide 13: The Combination is Transformative to MDC's Financial Profile
12 The Proposed Transaction materially improves MDC’s growth rate and margin profile, while adding significant scale The Combination is Transformative to MDC’s Financial Profile 1 NET REVENUE¹ EBITDA ’20 - ’25 CAGR (15.3%) 10.9% 3.5% 5.6% (11.8%) 14.6% 5.3% 10.8% +520bps MDC Standalone PF MDC Net Re
Slide 14: The Combination is Transformative to MDC's Credit Profile
13 Combination with Stagwell materially reduces leverage; limited optionality for MDC to meaningfully reduce leverage on a stand alo ne basis The Combination is Transformative to MDC’s Credit Profile 1 SYNERGY IMPACT 3.3x 3.0x $ in millions LTM as of: 3/31/21 3/31/21 Pro Forma at Closing Revenue $
Slide 15: Cost Synergies Create Value for Shareholders
14 Cost Synergies Create Value for Shareholders 1 Corporate 9% T&E 5% Shared Services 16% Media 32% Production 10% Research 12% Real Estate 9% Other 1 7% Annualized Cost Synergies ~55% Expected To Be Realized by Year 1 ~90% Expected To Be Realized by Year 2 100% Expected To Be Realized by Year 3 $30
Slide 16: Transaction Terms Result of a Rigorous Process by Independent Special Committee
5.00 4.00 3.08 4.35 5.0 The Transaction and Its Terms Are the Result of a Rigorous Process by the Independent Special Committee 2 STRICTLY CONFIDENTIAL
Slide 17: Rigorous Process Led by Independent Board and Special Committee
16 ▪ MDC’s 2018 - 2019 process was led by an experienced and independent board that conducted a rigorous process ─ 34 parties were contacted as part of the process resulting in only 1 actionable proposal , from Stagwell, culminating in its investment in the company ▪ In 2020 and 2021, MDC’s Special
Slide 18: The Special Committee Worked to Get Stagwell to Raise its Offer Seven Times
17 The Special Committee Worked to Get Stagwell to Raise its Offer Seven Times 2 Evolution of Split Negotiations to Achieve Best Outcome Source: Definitive Proxy Statement/Prospectus on Form 424B3 as supplemented by the Supplement to the Proxy Statement/Prospectus on Form 8 - K filed by MDC with the
Slide 19: Key Minority Shareholder & Corporate Governance Protections
5.00 4.00 3.08 4.35 5.0 The Transaction Incorporates Key Minority Shareholder & Corporate Governance Protections 3 STRICTLY CONFIDENTIAL
Slide 20: Key Minority Shareholder & Corporate Governance Protections
19 Transaction Includes Key Minority Shareholder & Corporate Governance Protections Transaction Agreement includes minority protections and many corporate governance protections: ▪ Strong and independent Board : ─ Three individuals who currently serve as MDC independent directors will serve as direc
Slide 21: The Transaction Creates Significant Value for MDC Shareholders
5.00 4.00 3.08 4.35 5.0 The Transaction Creates Significant Value for MDC Shareholders 4 STRICTLY CONFIDENTIAL
Slide 22: Summary of Value Approach
21 Summary of Value Approach 4 ▪ The Special Committee sought to understand relative valuations of MDC and Stagwell ─ An all - stock transaction must be evaluated on a relative Basis; relative value implies fair equity splits ─ The Special Committee considered the relative value calculated using a n
Slide 23: Implied Relative Contribution of MDC and Stagwell Based on Benchmarking to Peers
22 20.9% 20.8% 38.7% 39.0% 0.0% 25.0% 50.0% 2022E 2021E Implied Relative Contribution of MDC and Stagwell Based on Benchmarking to Peers 4 Source: CapitalIQ as of 7/9/2021, Definitive Proxy Statement/Prospectus on Form 424B3 as supplemented by the Supplement to the P roxy Statement/Prospectus on For
Slide 24: Valuation Considerations: Trading Range, Liquidity, Visibility, Leverage
23 ▪ 52 - week Trading Range : Prior to Stagwell’s initial proposal on June 25, 2020, MDC traded in a 52 - week range of $1.01 - $ 3.43 per share. Since then MDC has traded up to $6.37 and is trading at $5.25 as of July 9, 2021 ▪ Implied Value of Stagwell Based on MDC Current Trading Value : Based o
Slide 25: Implied Value of Stagwell Based on MDC Market Prices
24 ($ in millions, except per share values) MDC Share Price $5.25 (✕) Shares Issued to Stagwell 180.0 Implied Stagwell Equity Value $945 (+) Stagwell Net Debt¹ $313 Implied Stagwell TEV $1,258 TEV / 2021E Pol. Avg. EBITDA 7.7x TEV / 2022E Pol. Avg. EBITDA 6.9x 2021E EBITDA Margin² 16.6% 2021E Net EB
Slide 26: Stagwell Compares Favorably When Benchmarked to Peers
25 15.8% 16.6% 18.6% 21.8% 21.8% 18.2% 16.3% 16.2% 16.0% 23.7% 19.2% (6.9%) (6.9%) 1.9% 2.8% 6.3% (1.8%) (2.4%) 35.2% N/A (13.9%) 29.1% (4.8%) (6.3%) (7.3%) (11.1%) (11.1%) 20.1% (3.4%) Q1 2020A Stagwell Compares Favorably When Benchmarked to Peers 4 Stagwell Experiencing High Levels of Growth Compa
Slide 27: Stagwell Compares Favorably When Benchmarked to Peers (cont'd)
26 5.0% 8.4% 4.7% 4.5% 3.9% 3.3% 2.5% 22.5% 7.9% Stagwell Compares Favorably When Benchmarked to Peers ( cont.d ) 4 Combination with Stagwell’s Businesses Improves MDC Growth Trajectory to Align with More Digitally - Focused Agencies Source: Capital IQ as of 7/9/2021, Definitive Proxy Statement/Pros
Slide 28: Selected Publicly Traded Marketing Services Companies Data
27 Selected Publicly Traded Marketing Services Companies Data 4 Source: Definitive Proxy Statement/Prospectus on Form 424B3 as supplemented by the Supplement to the Proxy Statement/Prospectus on Form 8 - K filed by MDC with the SEC on 7/12/2021, Capital IQ as of 7/9/2021 Note: EV/EBITDA multiples ba
Slide 29: Transaction Represents Significant Premiums of Over 350% to Unaffected
28 Transaction Represents Significant Premiums of Over 350% to Unaffected 4 STRICTLY CONFIDENTIAL Source: Capital IQ as of 7/9/2021 MDC Has Seen Greater Share Price Appreciation Than Its Peers Since Original Stagwell Letter on June 25, 2020 357% 52% 57% 92% 57% 101% 157% 141% 144% 30% 19% 28% 23% 38
Slide 30: Transaction Received Positive Market Reaction as Demonstrated by Share Price Appreciation
5.00 4.00 3.08 4.35 5.0 The Transaction Received Positive Market Reaction as Demonstrated by Share Price Appreciation 5 STRICTLY CONFIDENTIAL
Slide 31: MDC Stock Price Reflects Broad Support for the Transaction
30 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 Jun-20 Aug-20 Nov-20 Jan-21 Apr-21 Jul-21 $5.25 ▪ Meaningful upside exists – We believe the current share price does not reflect the full upside potential from the transaction ─ The current price is depressed as a result of perceived transaction unc
Slide 32: Transaction has Reduced Uncertainty and Reduced MDC Borrowing Costs
31 50.0 75.0 100.0 125.0 - 5.0% 10.0% 15.0% 20.0% 25.0% Jul-19 Nov-19 Apr-20 Sep-20 Feb-21 Jul-21 Yield Price 5.9% 101.3 Transaction has Reduced Uncertainty and Reduced MDC Borrowing Costs ▪ Before Stagwell’s initial proposal in June 2020, MDC’s debt was yielding over 10% and spiked to over 20% in M
Slide 33: Pro Forma Increase in Market Cap May Boost MDC's Trading Liquidity
32 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Jan-17 Jul-17 Feb-18 Sep-18 Apr-19 Oct-19 May-20 Dec-20 Jul-21 30 - Day Average Daily Volume x Closing Price ($ in 000s) Pro Forma Increase in Market Cap May Boost MDC’s Trading Liquidity Daily trading value (i.e. dollar volume) has rarely exceeded $1 m
Slide 34: Appendix: Response to Investor Questions and Other Information
5.00 4.00 3.08 4.35 5.0 Appendix: Response to Investor Questions and Other Information STRICTLY CONFIDENTIAL
Slide 35: Indaba's Opposition to the Deal Is Based on Faulty Arguments
34 Indaba’s Opposition to the Deal Is Based on Faulty Arguments Questions/Concerns Summary of Responses Valuation ▪ MDC is not being valued fairly in the transaction ▪ In a stock merger involving two strategic entities, a relative contributions analysis is the appropriate measure of fairness ▪ The p
Slide 36: Series Preferred Shares Voting Rights
35 Series 6 Preferred Shares Voting Rights STRICTLY CONFIDENTIAL ▪ Holders of the Series 6 shares will be granted a one - time, increased - voting right, only with respect to the Up - C reorganization merger and no other matters ▪ Granting such voting right is necessary to achieve the optimal timeli
Slide 37: Certain Defined Terms
36 Certain Defined Terms STRICTLY CONFIDENTIAL The following capitalized terms have the meanings set forth below: ▪ “ Post - Closing Governance Period ” means the period, commencing at the closing of the transaction and continuing until such time as Stagwell and its affiliates collectively beneficia