MDC Partners Inc. MDCA 5.52% said Wednesday that Scott Kauffman will step down from his role as chairman and chief executive of the advertising company.
The New York-based firm, which owns agencies such as 72andSunny and Crispin Porter + Bogusky has struggled with client cutbacks and a slowdown in new business.
Mr. Kauffman will remain in the role until the company finds a successor, and will hold onto his board role after a new CEO is appointed, according to an MDC statement.
Some board members have been dissatisfied with Mr. Kauffman’s performance for some time, according to a person familiar with the matter. In the second quarter, MDC saw its net income decline to $1 million from $8 million in the year-earlier period.
Investors have also expressed concern. After the firm reported lackluster first quarter earnings and downgraded its full-year guidance, Leon Cooperman of hedge fund Omega Advisors signaled his frustration during an investor call. “I’ve held on for so long because I was hoping the industry would be consolidated, but I’m wondering whether with the advent of digital media, Google and Facebook ’s effect on the advertising business, whether the franchise is worth less than I would have thought,” said Mr. Cooperman.
Over the past year, MDC has seen its stock price decline more 50%.
In 2016, MDC hired investment banking adviser LionTree to evaluate its “financial and capital structure strategy.” As a result of the process, Goldman Sachs invested $95 million in MDC, giving it a 15% stake in the beleaguered business.
“We appreciate Scott’s efforts to lead MDC during a challenging transition time for the company and the industry,” said Larry Kramer, Chairman of MDC’s HR & Compensation Committee, in a statement. “He has advanced the company’s offerings in data and technology, demonstrated a commitment to diversity and inclusion, and put in place a foundation that we believe sets our agencies up for success going forward.”
Mr. Kauffman, who was formerly a director on MDC’s board, replaced founder Miles Nadal as CEO in 2015, amid a Securities and Exchange Commission investigation into Mr. Nadal’s expenses and other matters.
The company in late 2016 reached an agreement in principle to resolve the SEC investigation.
“This is the right time for me to transition back to the board, and I look forward to supporting our partners, the executive team and my colleagues throughout this process to ensure that we have the stability and continuity necessary for success,” said Mr. Kauffman in a statement.