The holding company business has always presented its leaders with a particular temptation: the notion that size, in and of itself, constitutes a strategy.
Mark Penn, the chief executive of Stagwell, suggested in an interview that he has no intention of succumbing to it. "They ran away with size being the primary criteria, as opposed to figuring out how to diversify their business streams," Mr. Penn told Adweek, referring to competitors whose expansion he views as having produced more heft than health.
It is a critique that has been leveled at the large agency holding companies with some regularity over the last decade, typically by executives at smaller ones. (Whether the critique lands differently when delivered by someone actively trying to make his own holding company larger is a question Mr. Penn did not address.)
Stagwell, which was formed through the 2021 merger of MDC Partners and Mr. Penn's digital firm, has been on an acquisition pace that suggests "lean" is a relative term. The company has positioned itself as a technology-forward alternative to the legacy giants — WPP, Omnicom, Publicis Groupe, Interpublic — whose structures it now describes as cautionary tales.
Mr. Penn also made a claim that has become something of a required offering in holding company earnings calls: that artificial intelligence tools developed by his firm could reduce clients' marketing costs by $100 million per year. The figure was presented without extensive detail about its derivation, which is not unusual for such projections.
The strategy of promising efficiency while pursuing growth is, of course, not new to Madison Avenue. What remains to be seen is whether Stagwell, in its effort to avoid the bloat it diagnoses in others, will prove to be the exception or merely the latest firm to discover that holding companies tend to get heavy the same way people do — gradually, and then all at once.
Original story published in adweek.com: "Stagwell’s Mark Penn Has a Plan to Avoid Holding Company Bloat"