WPP WPP PLC

By Suzanne Vranica 

MDC Partners Inc. said it has agreed to acquire Forsman & Bodenfors, a highly awarded creative agency based in Gothenburg, Sweden.

A 30-year-old agency, F&B had about $40 million in revenue last year and roughly 300 employees. Over the past few years, the agency has made waves in ad circles with some memorable advertising for companies such as Volvo AB, Procter & Gamble Co., and IKEA.

The deal, which is expected to close early in the third-quarter, includes an initial upfront payment of 1.9 million shares of MDC stock (roughly $32.3 million) with the rest to be paid in an earn-out based arrangement, the company said.

This is the first acquisition for MDC Chief Executive Scott Kauffman, who took over the reins of MDC last July after former CEO Miles Nadal stepped down amid an ongoing Securities and Exchange Commission investigation into Mr. Nadal's expenses and MDC accounting.

MDC, which is far smaller than other ad companies such as WPP PLC and Omnicom Group Inc., has differentiated itself from others in the ad sector by depending largely on creative services for its revenue growth. It owns creative shops such as 72andSunny and Crispin Porter + Bogusky.

However, over the past few years MDC has expand into other areas such as media services. Many on Madison Avenue expected Mr. Kauffman, who has spent the past two decades in Silicon Valley, to speed up MDC's push into ad tech and media service, which have been more profitable areas for other ad companies.

"I thought it was really important for the first acquisition to send a clear signal to the marketplace about what makes us unique," said Mr. Kauffman. "Many of the aspects of ad tech are nearing commoditization, but creative innovation is a true differentiator for global marketers," he added.

F&B has been behind some highly regarded advertising including "Epic Split," an online video ad for Volvo Trucks, which featured Jean-Claude Van Damme doing a split atop two moving trucks to demonstrate the dynamic steering system of the vehicles.

For F&B, a tie up with MDC was needed to help the agency service large global marketers who need help crafting ads around the world.

"We needed a partner to expand our business," said Erik Sollenberg, chief executive of F&B. "The ad world is becoming more and more global."

Rather than use the capital from the deal to simply open offices in countries around the world--a path that many smaller agencies follow post-acquisition-- F&B will form a partnership with MDC's CP+B, which will help them service clients in the U.S. and other countries that CP+B operates in.

CP+B will also benefit from the solid creative reputation F&B currently enjoys. CP+B, which had at one time been one of the most creative agencies in the country, has recently been outshined by other creative shops including sister agency 72andSunny.

F&B has "figured out a way to institutionalize creative brilliance over two decades and that is a really hard thing to do," said Chuck Porter, chairman of CP+B. "We can learn some things from them in terms of how they manage creative. Plus they have a spectacular talent pool."

Write to Suzanne Vranica at suzanne.vranica@wsj.com

(END) Dow Jones Newswires

June 29, 2016 06:19 ET (10:19 GMT)

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