Exhibit 99.1

FOR IMMEDIATE ISSUE

Stagwell Inc. (STGW) Announces Offering of Senior Notes to Refinance Existing Debt

NEW YORK, August 10, 2021 -- (NASDAQ:STGW) -- Stagwell Inc. (“Stagwell”) today announced a proposed offering (the “Offering”) by its subsidiary Midas OpCo Holdings LLC (the “Issuer”) of senior unsecured notes (the “Notes”). The Notes will be guaranteed by all of Stagwell’s domestic subsidiaries that guarantee the Issuer’s amended and restated $500 million senior secured revolving credit facility. The precise timing, size and terms of the Offering are subject to market conditions and other factors. No assurance can be made that the Offering will be consummated on its proposed terms or at all.

The Issuer intends to use the net proceeds from the Offering to redeem all $870.3 million aggregate principal amount of its outstanding 7.50% Senior Notes due 2024 (the “Existing Notes”), including accrued interest, related premiums, fees and expenses, to reduce credit facility borrowings and for general corporate purposes.

The Notes and the related note guarantees will be offered in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and to non-U.S. persons in accordance with Regulation S under the Securities Act. The Notes and the related note guarantees have not been, and will not be, registered under the Securities Act or any state securities laws. The Notes and the related note guarantees may not be offered or sold in the United States or to, or for the benefit of, U.S. persons absent registration under, or an applicable exemption from, the registration requirements of the Securities Act and applicable state securities laws.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the Notes or any other security and shall not constitute an offer, solicitation or sale in any jurisdiction in which, or to any persons to whom, such offering, solicitation or sale would be unlawful. Any offers of the Notes will be made only by means of a private offering circular. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.

About Stagwell Inc.

Stagwell is the challenger holding company built to transform marketing. Stagwell delivers scaled creative performance for the world's most ambitious brands, connecting culture-moving creativity with leading-edge technology to harmonize the art and science of marketing. Led by entrepreneurs, Stagwell’s 12,000+ specialists in 30+ countries are unified under a single purpose: to drive effectiveness and improve business results for their clients.

Forward-Looking Statements

This communication may contain certain forward-looking statements (collectively, “forward-looking statements”) within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended and Section 21E of the U.S. Exchange Act and the United States Private Securities Litigation Reform Act of 1995, as amended. Statements in this document that are not historical facts, including statements about Stagwell’s beliefs and expectations and recent business and economic trends, constitute forward-looking statements. Words such as “estimate,” “project,” “target,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “create,” “intend,” “could,” “should,” “would,” “may,” “foresee,” “plan,” “will,” “guidance,” “look,” “outlook,” “future,” “assume,” “forecast,” “focus,” “continue,” or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors. Such forward-looking statements may include, but are not limited to, statements related to future financial performance and the future prospects of the business and operations of Stagwell. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement, including the risks identified in our filings with the Securities Exchange Commission (the “SEC”).

These forward-looking statements are subject to various risks and uncertainties, many of which are outside Stagwell's control. Important factors that could cause actual results and expectations to differ materially from those indicated by such forward-looking statements include, without limitation, the risks and uncertainties set forth under the caption “Risk Factors” in Stagwell’s Annual Report on Form 10-K for the year-ended December 31, 2020 under Item 1A and under the caption “Risk Factors” in Stagwell’s Quarterly Report on Form 10-Q for the quarter-ended June 30, 2021 under Item 1A. Unless required by law, Stagwell undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made.

Contact:

Michaela Pewarski

michaela.pewarski@stagwellglobal.com

646-429-1812

Exhibit 99.2

DISCLOSURES REGARDING Stagwell Inc. and Midas OpCo Holdings LLC

This disclosure contains forward-looking statements. Statements in this disclosure that are not historical facts, including statements about our beliefs and expectations, recent business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this disclosure. See the Annual Report on Form 10-K for the year ended December 31, 2020, the Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Stagwell Subject Entities” in this disclosure. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events, if any.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:

Overview

This offering is being conducted in connection with and following the combination of the businesses of MDC Partners Inc. (“MDC”) and the operating businesses and subsidiaries (the “Stagwell Subject Entities”) of Stagwell Media LP (“Stagwell Media”). Pursuant to the Transactions (as defined herein) Stagwell Media contributed (i) the Stagwell Subject Entities to the Issuer in exchange for certain equity interests of the Issuer and (ii) $1,800 in cash to Stagwell Inc. in exchange for Class C common shares of Stagwell Inc. As part of the Transactions, MDC redomiciled as a Delaware corporation and merged (the “Merger”) with and into MDC Merger Sub 1 LLC (“Merger Sub”). In connection with the Merger, the separate corporate existence of Merger Sub ceased and the Issuer continued as the surviving company and a wholly-owned subsidiary of MDC Stagwell Holdings Inc. (the public company successor to MDC following the Merger). Upon the contribution of the Stagwell Subject Entities to the Issuer, MDC Stagwell Holdings Inc. was renamed Stagwell Inc.

References in this disclosure to “the Issuer,” “we,” “our,” and “us” and refer to Midas OpCo Holdings LLC and its consolidated subsidiaries, except as otherwise indicated or the context otherwise requires. References to “the Company” are to the post-Transactions combined company, Stagwell Inc., and its consolidated subsidiaries and references to “Stagwell Inc.” refer to Stagwell Inc., a Delaware corporation and the Issuer’s parent company only and not any of its subsidiaries. We are the result of a recent series of transactions that combined the business of MDC with the Stagwell Subject Entities. References in this offering circular to “Partner Firms” generally refer to the Company’s subsidiary agencies. It is currently anticipated that, prior to the issuance of the Notes, the name of the Issuer will be changed.

On December 21, 2020, MDC and Stagwell Media entered into a definitive transaction agreement (as amended on June 4, 2021 and July 8, 2021, the “Transaction Agreement”) providing for the combination of MDC with the Stagwell Subject Entities through a series of steps and transactions as described in the Transaction Agreement and further in the section entitled “–The Transactions” of this offering circular. The Transactions (as defined below) were consummated on August 2, 2021.

The combination of MDC with the Stagwell Subject Entities is intended to build a holding Company positioned to transform marketing. The Company aims to deliver scaled creative performance for some of the world’s most ambitious brands, connecting creativity with leading-edge technology to harmonize the art and science of marketing. Led by entrepreneurs, the Company’s more than 12,000 specialists in over 30 countries strive to drive effectiveness and improve business results for their clients.

Over the last 15 years, marketing was characterized by television and brand advertising targeted to many through scale and reach. Since that time, a significant majority of overall growth in the industry has come from the expansion of digital marketing with the creation and growth of digital/social media platforms including: Facebook, Google, Twitter, Snapchat, LinkedIn and TikTok. Furthermore, the ability of consumers to purchase products through online channels (e-commerce) either on digital platforms like Amazon or on retailers’ own websites has allowed marketers to create their own relationships with customers.

With 21st century technical and digital know-how across Stagwell Inc. (the “Company”), we believe we are positioned to take advantage of the continued disruption sweeping the marketing universe. The goal in the current market is for marketers, based on the ability to leverage various types of customer data, to target the right ads and content to the right people at the right time. With the creative assets at MDC and the digital expertise at Stagwell, we believe the Company is positioned to play a strong role in disrupting the legacy holding company model based on this new digital paradigm when the competition is still very much reliant on the marketing model of the past.

On a combined basis, the Company would have had Adjusted EBITDA of $408 million for the twelve months ended June 30, 2021 assuming $30 million of targeted synergies. Adjusted EBITDA is not a pro forma measure in accordance with Article 11 of Regulation S-X. Stagwell Adjusted EBITDA is calculated using a different methodology than the methodology used to calculate Adjusted EBITDA in the S-4 registration statement.

Our Industry

Competition

In the competitive, highly-fragmented marketing and communications industry, both MDC and the Stagwell Subject Entities compete for business and talent with the operating subsidiaries of large global holding companies such as Omnicom Group Inc., Interpublic Group of Companies, Inc., WPP plc, Publicis Groupe SA, Dentsu Inc. and Havas SA, numerous independent agencies that operate in multiple markets, as well as consultancies like Accenture and Deloitte, tech platforms, media companies and other services firms that have begun to offer marketing-related services. Following the Transactions, the Company is in a position to address some of the competitive factors through its increased digital media platform as well as shifting the geographic focus.

The Company’s agencies must compete to maintain existing client relationships and to obtain new clients and assignments. A key to the Company’s agencies’ ability to do this effectively is providing clients with disruptive marketing ideas and strategies that are focused on increasing clients’ revenues and profits. Existing and potential clients include multinational corporations and national companies with mid-sized to large sized marketing budgets. The Company also benefits from cooperation among its entrepreneurial agencies through referrals and the sharing of both services and expertise, which enables the Company to serve clients’ varied marketing needs around the world by crafting custom integrated solutions.

The Company’s ability to compete for new clients is affected in some instances by clients’ policies of not permitting agencies to represent competitive accounts in the same market. In most cases, however, the Company’s consistent maintenance of separate, independent operating agencies has enabled the Company to represent competing clients across its network.

Industry Trends

There are several recent economic and industry trends that affect or may be expected to affect the Company’s results of operations, most notably the business and consumer behavior changes driven by the COVID-19 pandemic. Historically, television advertising has been the primary service provided by the marketing communications industry. However, as clients aim to establish one-to-one relationships with customers, and more accurately measure the effectiveness of their marketing expenditures, specialized and digital communications services, as well as data and analytics services, are consuming a growing portion of marketing dollars. Over the last year, digital transformation has been meaningfully accelerated, with businesses across all categories relying on the strength of their e-commerce and digital experiences. The Company believes these accelerated changes in the way consumers interact with media and brands are increasing the demand for a broader range of non-advertising marketing communications services (such as user experience design, digital products, artificial intelligence, augmented reality, product innovation, direct marketing, sales promotion, interactive, mobile, strategic communications, research and public relations), which the Company expects could have a positive impact on its results of operations. There has been significant growth in marketing communications and public relations with the heightened importance of reputation and growth in Environmental, Social and Governance (“ESG”) and special situations work. Research has been growing at increased rates during 2021 to date as compared to 2020 as theatrical entertainment and in-person movie watching—key drivers of the Company’s Research-Technology segment—begin to rebound from the COVID-19 pandemic.

In addition, the rise of technology and data solutions have rendered scale less crucial than it once was in areas such as media buying, as smaller firms can reach further through digital platforms, creating significant opportunities for agile and modern players. In the past, creative advertising was separated from media but given the growth of digital platforms, global marketers now demand breakthrough and integrated creative ideas with the media that delivers them. Digital e-commerce, fundraising, influencer and performance marketing are poised for growth as customers are continuously looking towards online platforms. Combined with the fragmentation of the media landscape, these factors provide new opportunities for mid-sized communications companies like those in the Company’s network. In addition, marketers now require even greater speed-to-market to drive financial returns on their marketing and media investment, causing them to turn to nimble, entrepreneurial and collaborative firms like the Company’s agencies.

During 2020, advertisers significantly decreased spend through traditional channels, which contracted 15.7%. However, overall ad spending only declined by 1.2% as digital ad spending grew 12.7% versus 2019. Digital ad spending is expected to increase by 20.4% in 2021 compared to $455.3 billion in 2020, according to the eMarketer report from June 6, 2021, due to several factors, including economic recovery from the COVID-19 pandemic, stronger-than-ever organic drivers, such as consumer shifts toward social media and digital video, digital marketing, and international sports events. Total media and ad spending is expected to reach $747.6 billion, reflecting a 15.1% growth rate in 2021 from 2020 according to the June 6, 2021 eMarketer report. Digital ad spending’s percentage of total media ad spending is expected to increase to nearly 68% by 2025 according to the June 6, 2021 eMarketer report.

Rapidly evolving consumer preferences toward modern digital media have produced a significant shift away from legacy media channels, which we believe hinders large agency holding companies that are slower to adapt to more dynamic marketing trends. Adults interact with media each day, particularly digital media; U.S. consumers have increased the amount of time they spend with media each day by approximately one hour to an average of 13 hours and 21 minutes per day from 2019 to 2020 according to the June 6, 2021 eMarketer report. Digital media specifically saw significant gains and this trend is expected to accelerate as increasing consumer expectations for personalized content will continue to shift marketing budgets towards digital media channels that are able to create seamless, customized brand experiences across all consumer touchpoints. Consumers are expected to spend more time with digital media on devices like smartphones versus traditional televisions or laptops as was customary in the past. Digital formats for both video and audio will continue to play a significant role as podcasts and video services maintain the popularity gains seen throughout 2020.

Combined Company’s Competitive Strengths

We believe the Company will benefit significantly from the following competitive strengths:

Enhanced Market Position and Improved Global Scale

The combination of MDC and the Stagwell Subject Entities creates a technology-enabled marketing services organization that represents a top ten advertising holding company based on revenue, that brings together talent and technology. The Company will offer a significantly expanded suite of high-growth digital services with new revenue streams from expanded digital and technology products based on digital transformation projects, and proprietary data, insights and analysis. The Company benefits from multiple channels of organic growth with a target of (i) 10%–15% annual digital marketing growth and complementary capabilities and (ii) over 9% total annual revenue growth including new products and acquisitions.

Much of the growth and focus for the Company will be driven by the digital services channel as it is the fastest growing channel of the marketing and advertising sector. As a combined entity, the Company will have four times more revenue from Digital Services than the MDC Legacy Business in 2019, as the Digital Services segment will represent 38% of the Company pro forma for the Transactions versus 9% of the MDC Legacy Business in 2019. The Digital Services segment was contributed to the Company primarily from the Stagwell Subject Entities and includes brands that support the delivery of content, commerce, service and sales using online channels. These brands create websites, back-end systems and other digital environments allowing consumers to engage with brands using search engine optimization, search engine marketing, influencer and affiliate marketing, email marketing, customer relationship management and programmatic advertising. Brands represented by the Digital Services segment include Code and Theory, Forward PMX Group, MMI Agency, Stagwell Technologies, Multiview, Targeted Victory, Instrument, YML, GALE and Kenna.

Pro forma for the Transactions, the Company will have nearly 40% of its revenue from high growth digital services, making it well suited to ride the wave of digital transformation:

In addition to a concentration in the fastest growing areas of marketing, the Company will boast global scale that will allow it to compete for the largest marketing contracts available. Including affiliates, at the time of the Transactions, the Company has a presence in 80 cities across 32 countries with over 10,700 employees.

Affiliates allow the Company to embed local talent into global and local engagements – this allows the Company to think globally and act locally at the same time. The affiliate program identifies agencies, tech companies and marketing services firms to bring talent and new capabilities into the already diverse network. Not only does this strategic approach allow the Company to work with agility around the world, we believe it is a better way to get top talent engaged no matter the market. Where both the MDC Legacy Business and the Stagwell Subject Entities already maintained a presence (e.g., New York City, Los Angeles, Paris and London), the Affiliate program creates a stronger local player in those markets, providing for additional potential to obtain market share in these markets.

Innovative Services for Some of the Most Recognizable Brands

The Company now includes renowned brands including:

Together, the Company offers the kind of scale and greater performance marketing that we believe today's clients are seeking, the strong combination of award-winning talent and creativity as well as the data and technology platform that can get the right advertisement to the right person at the right time.

The combined Company offers a way for brands to shift how they think about marketing, and what marketing can achieve:

Featured capabilities for the company include creativity, brand strategy, market research, media, technology, public affairs, crisis management, public relations, production, influencer, multicultural, experiential, ecommerce, CRM, digital advocacy, consumer insights and performance marketing. In combination, this produces a compelling set of accomplishments for brands to hire:

One sign of the Company’s strongest market positions is the large, high quality portfolio of clients across diverse end markets. The Company serves approximately 4,000 clients across diverse industries, including some of the world’s most notable blue chip global brands, as well as thousands of small and medium-sized business (“SMB”) clients.

The Company’s distinct agency structure allows it to work with clients within the same business sector through independent agencies, tailoring custom marketing companies to meet their needs, as well as maintain a diversified client base by sector. This further complements the Company’s diversified customer base, in which the combined Company does not have a single client representing more than 5% of its consolidated revenue. Currently, many of the Company’s largest clients are served by multiple brands or agencies in its portfolio across multiple advertising and marketing disciplines, thereby providing a further layer of diversity and reduced financial risk.

Strong Margin Profile and Robust Free Cash Flow Generation

The Company’s business model has attractive cash flow characteristics that enable us to fund our growing business. Specifically, the Company has strong Adjusted EBITDA margins with near-term opportunities for expansion, and the Company’s business operates with a high percentage of variable costs and low levels of capital investment given that its operations are primarily a people-based service business. The Company is targeting a consolidated leverage ratio of approximately 3.0x in the near-to-medium term after giving full effect for run-rate synergies. The Company is continuously focused on optimizing its operations to maximize cash generation as it views cash generation to be the best metric by which to generate value for its stakeholders.

Experienced Management Team with Proven Track Record

The Company is led by a proven team of seasoned executives who have a long-term track record of success in the advertising industry. Mark Penn assumed the position of Chairman and CEO of MDC in 2019, roles he maintains today for the Company. Mr. Penn brings a reputation as a portfolio builder and previously served as EVP & Chief Strategy Officer at Microsoft, running Microsoft’s $2 billion advertising budget and working on the corporation’s most difficult challenges like the revitalization of Bing.

Prior to Microsoft, Penn served as CEO of Burson-Marsteller from 2006–2012, running the global PR and public affairs firm with an 80+ market footprint and tripling profits over his tenure. Penn has served numerous corporate and political clients in his career including Hillary Clinton and Tony Blair. In addition to Mark Penn, the leadership team includes President Jay Leveton (previously a partner in Stagwell), CFO Frank Lanuto (previously CFO of MDC) and COO Ryan Greene (previously CFO of the Stagwell Group). The leadership combination from both legacy businesses will not only maintain continuity going forward but also position the Company for combined growth given these leaders’ intimate knowledge of the businesses.

The Company’s management team has successfully demonstrated an ability to efficiently operate, manage and grow a profitable portfolio of diverse advertising businesses through periods of dramatic changes in consumer behavior and technological advancement, and through economic cycles. The team has a successful track record of investing, acquisition execution, and integration as well as recruiting and retaining key talent that drive the Company’s operating businesses. In turn, the Company’s agencies are run by some of the most successful and recognized entrepreneurs in the industry.

Our Strategy

The key elements of the Company’s strategy include:

Growth Strategy

The Company has a plan to grow from approximately $2.1 billion to $3 billion in revenue that is targeted by 2025, including potential acquisitions, growth of approximately $325 million, potential combined organic revenue growth of approximately $500 million and potential new products and digital revenue streams of approximately $50 million. Pro forma for the Transactions, the Company is targeting 5% of annual organic sales growth. The Company aims to transform the marketing services industry from the way it partners with clients to the business solutions that it provides. The Company has a goal to focus on companies operating in the high-growth digital service areas. The Company aims to grow its blue-chip client base as it offers services to top corporations in all verticals.

The company has four key growth drivers.

First, Digital Transformation. The Company is already concentrated (nearly 40%) in high growth areas of digital marketing. Continuing to invest in key digital companies like Code and Theory, Instrument and YML will provide substantial growth to the portfolio. In addition, continued M&A in digital transformation and digital media buying will bolster existing assets. Key areas the Company is targeting for internal investment and acquisition include:

In addition to driving topline growth, the Company will expand its global development offering. The Company currently is home to approximately 1,000 engineers globally with different specialties and operating in different time zones. By continuing to expand its developer base and move some development operations to a shared team, the Company will improve efficiency, deliver best-in-class development across platforms and be able to work more consistently across time zones.

Second, Scaled Creative Performance. With the Company managing $4.4 billion of media spend, the Company will be able to eliminate the artificial silo between brand marketing and performance media. The recently-announced Stagwell Media Network includes leading multichannel agencies Assembly, Forward PMX, MMI Agency, Media Kitchen, and Grason, creative consultancy GALE, B2B specialist Multiview, and transcreation agency Locaria. The network will offer marketers a more dynamic partner for global B2B and B2C solutions spanning data, technology, media and creativity aimed at accelerating business growth for brands worldwide.

One of the key ways the Company’s media offering will succeed is through its media-agnostic approach. The Company’s media firms are digital-first, meaning they are not beholden to legacy television and offline contracts that require inventory to be used regardless of what is best for the client. This means being able to provide solutions leveraging digital technologies and media in addition to traditional media advertising, and as the rise of new media adds to the complexity of the advertising landscape, the Company believes its media-agnostic approach becomes even more advantageous.

Third, Rolling Out New SaaS Digital Marketing Products. The Company will not just sell digital marketing services – it will develop its own Products from cookie-less data platforms for advanced audience targeting and activation to innovative applications of text messaging for consumer engagement. The Company is creating new, recurring, high-value revenue streams based on its client base, industry expertise, and engineering heft. These new revenue streams are expected to drive $75 million of incremental, primarily recurring revenue over time.

Below is an overview of the Company’s proprietary tech-enabled Products:

Fourth, Competing for and Winning Large, Global Marketing Contracts. While the top four marketing holding companies have historically had a stranglehold on these opportunities, with this combination the Company can create global teams with the potential to win contracts worth tens of millions of dollars. The Company’s expanded global scale via Affiliates bolsters this growth. In stark contrast to the outdated model pursued by many of the Company’s competitors whereby they are left with overbuilt and inefficient brick-and-mortar offices across the globe, the Company’s Affiliates program efficiently drives market share growth with both existing clients and helps win new business.

The Company already has a record of jointly won pitches, with Doner and Code and Theory, including unseating a decades-long incumbent at a Fortune 100 company as well as recent media buys for hundreds of millions of dollars generated by some of the Stagwell Subject Entities.

In addition to competing for new global marketing contracts, the global team is a key contributor to growing existing accounts, which improves client retention.

Realize Cost Synergies and Drive Efficiencies

The Company expects to drive significant long-term operating efficiencies from the Transactions with an expected $30 million in annualized gross cost synergies. The Company expects that synergies will be quickly implemented, with 90% of expected run-rate synergies expected to be achieved within 24 months ahead of 100% realization by the end of 36 months. The Company expects that synergies will come from a variety of areas, with approximately 32% of synergies coming from the elimination of redundancies in the media segment, followed by 16% in shared services, 12% in research, and 10% from content production being recaptured internally

Management estimates the cost to achieve synergies will be approximately $24 million, or 80% of the annual run rate synergies. A majority of the spend will fund personnel restructuring charges as well as system implementation costs, which will include global accounting, human resource management, and other centralized back-office systems. These costs will be incurred during the 36-month implementation period.

Risk Factors

Risks Related to the Company

The Stagwell Subject Entities are subject to similar business risks as MDC.

The Stagwell Subject Entities concentrate their business activities in services that are similar or adjacent to MDC’s and therefore are affected by many of the same economic conditions and similar risk that MDC faces in its business operations. The Company is subject to the same risks that MDC and the Stagwell Subject Entities previously faced and in some cases those risks may be increased by the operations of the Company.

The Company competes for clients in highly competitive industries.

The Company operates in a highly competitive environment in an industry characterized by numerous advertising and marketing agencies of varying sizes, with no single advertising and marketing agency or group of agencies having a dominant position in the marketplace. Even following the Transactions, the Company is smaller than several of its larger industry competitors. Competitive factors include creative reputation, management, personal relationships, quality and reliability of service and expertise in particular niche areas of the marketplace. In addition, because an agency’s principal asset is its people, barriers to entry are minimal, and relatively small agencies are, on occasion, able to take all or some portion of a client’s business from a larger competitor.

While many of the Company’s client relationships are long-standing through MDC or the Stagwell Subject Entities, companies put their advertising and marketing services businesses up for competitive review from time to time, including at times when clients enter into strategic transactions or experience senior management changes. To the extent that the Company fails to maintain existing clients or attract new clients or if we fail to meet marketing performance target or other client expectations, the Company’s business, financial condition, operating results, and cash flows may be affected in a materially adverse manner.

The Company’s business could be adversely affected if it loses key clients.

The Company’s strategy has been to acquire ownership stakes in diverse marketing communications businesses to minimize the effects that might arise from the loss of any one client. The loss of one or more clients could materially affect the results of the individual agencies and the Company as a whole.

A significant reduction in spending on our services by our largest clients, or the loss of several of our largest clients, could have a material adverse effect on our business, results of operations and financial position.

The Company’s ability to generate new business from new and existing clients may be limited.

To increase its revenues, the Company needs to obtain additional clients or generate demand for additional services from existing clients. The Company’s ability to generate initial demand for its services from new clients and additional demand from existing clients is subject to such clients’ and potential clients’ requirements, pre-existing vendor relationships, financial conditions, strategic plans and internal resources, as well as the quality of the Company’s employees, services and reputation and the breadth of its services. To the extent the Company cannot generate new business from new and existing clients due to these limitations, the Company’s ability to grow its business and to increase its revenues will be limited.

The Company’s business and results of operations have been adversely affected and could in the future be materially adversely affected by the COVID-19 pandemic.

The COVID-19 pandemic is adversely impacting, and is expected to continue to adversely impact, our business and results of operations.

As part of efforts to contain the spread of COVID-19, governmental authorities have imposed various restrictions, such as travel bans, stay-at-home orders and quarantines, social distancing measures and temporary business closures. COVID-19 and the actions taken by governments, businesses and individuals in response to the pandemic have resulted in, and are expected to continue to result in, a substantial curtailment of business activities, weakened economic conditions, and significant economic uncertainty.

Many clients have responded to weak economic and financial conditions by reducing their marketing budgets, thereby decreasing the market and demand for our services. This is adversely impacting and is expected to continue to adversely impact our business and results of operations. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Stagwell Subject Entities” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the MDC 2020 Annual Report, the MDC 2021 Q1 Report and the MDC 2021 Q2 Report.

We are also facing increased operational challenges as we take measures to support and protect employee health and safety, including limiting employee travel, closing offices, and implementing work-from-home policies for employees. In particular, our remote work arrangements, coupled with stay-at-home orders and quarantines, pose new challenges for our employees and our IT systems and extended periods of remote work arrangements could strain our business continuity plans and introduce operational risk, including but not limited to cybersecurity and IT systems management risks.

The effects of the COVID-19 pandemic may also limit the resources afforded to or delay the implementation of our strategic initiatives and make it more difficult to develop and market innovative services. If our strategic initiatives are delayed or otherwise modified, such initiatives may not achieve some or all of the expected benefits, which could adversely impact our competitive position, business, results of operations and financial condition. The impact of the COVID-19 pandemic has also exacerbated and may continue to exacerbate other risks discussed herein, any of which could have a material effect on us. This situation is changing rapidly and additional impacts may arise that we are not aware of currently.

The Company’s business could be adversely affected if it loses or fails to attract or retain key executives or employees and if it cannot successfully integrate the businesses of MDC and the Stagwell Subject Entities.

Employees, including creative, research and data acquisition, analytics and data science, media, technology development, content development, account and practice group specialists, and their skills and relationships with clients, are among the Company’s most important assets. An important aspect of the Company’s competitiveness is its ability to retain key employee and management personnel. Compensation for these key employees is an essential factor in attracting and retaining them, and the Company may not offer a level of compensation sufficient to attract and retain these key employees. If the Company fails to hire and retain a sufficient number of these key employees, it may not be able to compete effectively. Management succession at our agencies is very important to the ongoing results of the Company because, as in any service business, the success of a particular agency is dependent upon the leadership of key executives and management.

In addition, the combination of the independent businesses of MDC and the Stagwell Subject Entities in connection with the Transactions is complex, costly and time-consuming and may divert significant management attention and resources and disrupt the Company’s business. The risks and difficulties of integration include, among others, the diversion of management attention to integration matters, increased difficulty retaining existing clients and obtaining new customers and the added strain on our executives of managing the expanded operations of a significantly larger company. If key executives were to leave our agencies, the relationships that the Company has with its clients could be adversely affected.

The Company is exposed to the risk of client defaults.

Certain of the Company’s agencies and brands often incur expenses on behalf of their clients for productions and in order to secure a variety of media time and space, in exchange for which they receive a fee. The difference between the gross production costs and media purchases and the revenue earned by us can be significant. While the Company takes precautions against default on payment for these services (such as credit analysis, advance billing of clients, and in some cases acting as an agent for a disclosed principal) and has historically had a very low incidence of default, the Company is still exposed to the risk of significant uncollectible receivables from our clients. The risk of a material loss could significantly increase in periods of severe economic downturn. Such a loss could have a material adverse effect on our results of operations, cash flows and financial position.

The business of the Company will be highly dependent on the services of Mark Penn, our Chief Executive Officer.

The Company will depend on the continued services and performance of our key personnel, including its Chairman and CEO, Mark Penn. Although we have entered into an employment agreement with Mr. Penn, the agreement has no specific duration and constitutes at-will employment. The loss of key personnel, including Mr. Penn, could disrupt our operations and have an adverse effect on our business.

The Company is subject to regulations and litigation risk that could restrict our activities or negatively impact our revenues.

Advertising and marketing communications businesses are subject to government regulation, both domestic and foreign. There has been an increasing trend in the United States for advertisers to resort to litigation and self-regulatory bodies to challenge comparative advertising on the grounds that the advertising is false and deceptive. Moreover, there has recently been an expansion of specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to advertising for certain products. Proposals have been made to ban the advertising of specific products and to impose taxes on or deny deductions for advertising which, if successful, may have an adverse effect on advertising expenditures and consequently, on the Company’s revenues.

Certain of the Company’s agencies and brands produce software and e-commerce tools for their clients, and these product offerings have become increasingly subject to litigation based on allegations of patent infringement or other violations of intellectual property rights. As we expand these product offerings, the possibility of an intellectual property claim against the Company grows. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations. We cannot be certain that we would be successful in defending against any such claims. If we are not successful in defending such claims, we could be required to rebrand, redesign or stop offering these products or services, pay monetary damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our clients, any of which could have an adverse effect on our business, reputation, financial conditions and may cause our operating margins to decline.

In addition, laws and regulations related to consumer privacy, use of personal information and digital tracking technologies have been proposed or enacted in the United States and certain international markets (including the European Union’s General Data Protection Regulation, or “GDPR,” the proposed updated European Union “ePrivacy Regulation” and the California Consumer Privacy Act, or “CCPA”). Further in the United States, both Congress and state legislatures, along with federal regulatory authorities, have continued to increase their attention on advertising and the collection and use of data, including personal data. At the federal level, while to date there has not been any successful efforts in enacting data privacy legislation, if successfully introduced, it would create additional regulatory and compliance obligations, legal risk exposure, and could significantly impact our business activities. At the state level, in California the California Privacy Rights Act, or “CPRA” was voted into law by ballot measure in November 2020, which will take effect on January 1, 2023. The CPRA significantly modifies the CCPA, including by imposing additional data privacy and protection obligations on covered companies and expanding consumer rights with respect to certain sensitive personal data. It will also create a new California data protection agency specifically tasked to enforce the law, which will likely result in increased regulatory scrutiny of covered businesses in the areas of data protection and security. Also, Virginia has adopted a new state data protection act referred to as the Virginia Consumer Data Protection Act, which is set to take effect on January 1, 2023. Further, Colorado has adopted a new state data protection act titled the Colorado Privacy Act, which is set to take effect on July 1, 2023. Similar laws have been proposed in other states, and if passed, the Company could still be subject to such laws regardless of whether the Company has operations or a physical presence in the applicable state. We face increasing costs of compliance in an uncertain regulatory environment and any failure or perceived failure to comply with these legal requirements could result in regulatory penalties or other legal ability. Also, any such laws may also have potentially conflicting requirements that would make compliance challenging, as well as potentially resulting in further uncertainty and requiring the Company to incur additional costs and expenses in an effort to comply. Furthermore, these laws and regulations may impact the efficacy and profitability of certain digital marketing and analytics services we provide to clients, making it difficult to achieve our clients’ goals. These and other related factors could affect our business and reduce demand for certain of our services, which could have a material adverse effect on our results of operations and financial position.

Compliance with data privacy laws requires ongoing investment in systems, policies and personnel and will continue to impact our business in the future by increasing legal, operational and compliance costs. While we have taken steps to comply with data privacy laws, we cannot guarantee that our efforts will meet the evolving standards imposed by governmental and regulatory agencies, including data protection authorities. In the event that we are found or suspected to have violated data privacy laws, we may be subject to additional potential private consumer, business partner or securities litigation, regulatory inquiries, governmental investigations and proceedings and we may incur damage to our reputation. Any such developments may subject us to material fines and other monetary penalties and damages, divert management’s time and attention, and lead to enhanced regulatory oversight, all of which could have a material adverse effect on our business and results of operations.

Some of the Company’s Partner Firms rely upon signatory service companies to employ union performers in commercials.

Some of the Company’s creative agencies that have not entered into the SAG-AFTRA Commercials Contract, an industry contract form for commercial advertising, have traditionally used signatory service companies, which are parties to the SAG-AFTRA Commercials Contract, to employ SAG-AFTRA union performers appearing in television, new media, and other commercials produced by those agencies. SAG-AFTRA has recently persuaded the principal signatory service companies to change the way such signatory service companies do business. These changes will make it more cumbersome and expensive for advertising agencies which have not entered into the SAG-AFTRA Commercials Contract to produce advertisements using SAG-AFTRA members, and in some cases may preclude the use of SAG-AFTRA members in a production. If a Partner Firm is unable to produce a commercial using a union performer, it may reduce the amount of business conducted by such Partner Firm. Accordingly, if SAG-AFTRA’s recent restrictions on signatory service companies are not modified, it could have a material adverse effect on our business, results of operations and financial position.

Our business operations could suffer if we fail to adequately protect and enforce our intellectual property and other proprietary rights.

We rely on trademark, patent, copyright, trade secret and other intellectual property laws, as well as contractual provisions such as confidentiality clauses, to establish and protect our intellectual property and other proprietary rights, including in our brands (and the trademark rights thereto) and our proprietary technologies. These laws are subject to change at any time and certain agreements may not be fully enforceable, which could restrict our ability to protect our intellectual property rights. Such means may also afford only limited protection of our intellectual property and may not: (i) prevent others from independently developing products or services similar to, or duplicative of, ours; (ii) prevent our competitors from gaining access to our proprietary information and technologies; or (iii) permit us to gain or maintain a competitive advantage. We cannot be sure that the actions we have taken to establish and protect our trademarks and other intellectual property rights will adequately protect us, and if our existing intellectual property rights are rendered invalid or unenforceable, or narrowed in scope, the intellectual property protections afforded our brands, products and services would be impaired. Such impairment could impede our ability to market our products and services, negatively affect our competitive position, and harm our business and operating results.

Our success depends in large part on the strength of our brands. We rely on trademark protection to protect our brands, and we have registered or applied to register many of these trademarks. While we have registered our material trademarks in many of our significant markets, we have not registered all of our marks in all of the jurisdictions in which we currently conduct or intend to conduct business. Further, if we seek to register these trademarks, we cannot be sure that our attempts will be successful, and any applications for trademark registration could be challenged or opposed by third parties. In the event that our trademarks are successfully challenged and we lose the rights to use those trademarks, we could be forced to rebrand our services, requiring us to devote resources to advertising and marketing new brands.

We also rely on patents to protect our products, services and designs. We have applied for, and expect to continue to apply for, additional patent protection for proprietary aspects of existing and proposed processes, services and products. Our patent applications may not result in issued patents, and any patents issued as a result of our patent applications may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. While a presumption of validity exists with respect to U.S. patents issued to us, our issued patents may nonetheless be challenged, invalidated, circumvented or rendered unenforceable, including through patent office ex parte reexamination, inter partes review or post-grant proceedings. If we fail to obtain issuance of patents, or our patent claims or other intellectual property rights are rendered invalid or unenforceable, or narrowed in scope, the patent protections afforded our products, processes and services could be impaired. Such impairment could harm our ability to market our products and services, negatively affect our competitive position and harm our business and operating results, including by requiring us to re-design our affected products or services. Moreover, our issued patents and patent applications may cover only certain aspects of our processes, services and products, and competitors and other third parties may be able to circumvent or design around our patents. Competitors may develop and obtain patent protection for more effective designs, methods, processes or other technologies. There can be no assurance that third parties will not create new products, processes or other technologies that achieve similar or better results without infringing upon patents we own. If these developments were to occur, it could have an adverse effect on our sales or market position.

Additionally, we seek to maintain the confidentiality of certain trade secrets and other proprietary information to preserve our position in the market. We employ various methods to protect such intellectual property, such as entering into confidentiality agreements with certain third parties and our employees, and controlling access to, and distribution of, our proprietary information. However, our efforts may not be effective in controlling access to our proprietary information, and we may not have adequate remedies for the misappropriation of such information. Furthermore, even if we successfully maintain the confidentiality of our trade secrets and other proprietary information, competitors may independently develop products or technologies that are substantially equivalent or superior to our own.

As we expand our service offerings and the geographic scope of our sales and marketing, we may face additional intellectual property challenges. Certain foreign countries do not protect intellectual property rights as fully as they are protected in the United States and, accordingly, intellectual property protection may be limited or unavailable in some foreign countries where we choose to do business. It may therefore be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries, which could diminish the value of our brands, products or services and cause our competitive position and growth to suffer. Filing, prosecuting and defending our intellectual property in all countries throughout the world may be prohibitively expensive. The lack of adequate legal protections of intellectual property or failure of legal remedies for related actions in jurisdictions outside of the United States could have an adverse effect on our business, results of operations, and financial condition.

Even if we successfully maintain our intellectual property rights, we may be unable to enforce those rights against third parties. While we generally seek to protect and enforce our intellectual property rights, including through litigation if necessary, monitoring for unauthorized use, infringement, misappropriation or other violations of our intellectual property rights can be expensive and time-consuming, and we are unlikely to be able to detect all instances of such violations. Furthermore, if we do litigate, litigation, regardless of merit, is inherently uncertain and our success cannot be assured. Any litigation could be lengthy and result in substantial costs and diversion of our resources and could have a material adverse effect on our business and results of operations, regardless of its outcome. If we are unsuccessful in enforcing our intellectual property rights, third parties may be able to offer competitive services and products at lower prices, and we may not be able to effectively compete against these companies. In addition, if any third party copies or imitates our products in a manner that affects customer or consumer perception of the quality of our products, our reputation and sales could suffer whether or not these violate our intellectual property rights.

Additionally, we have licensed, and may license in the future, patents, trademarks, trade secrets and other intellectual property rights from third parties, and the licenses we receive to such intellectual property rights may not provide exclusive or unrestricted rights in all fields of use and in all territories in which we may wish to develop or commercialize our products in the future and may restrict our rights to offer certain products in certain markets or impose other obligations on us in exchange for our rights to the licensed intellectual property. If we violate the terms of any of our license agreements, such as by failing to make specified royalty payments or failing to comply with quality control standards, a licensor may have the right to terminate our license. Even if we comply with all the terms of a license agreement, we cannot guarantee that we will be able to renew an agreement when it expires even if we desire to do so. The failure to maintain or renew our material license agreements could result in a loss of revenue and negatively impact our results of operations. We also grant licenses to third parties which allow third parties the right to use certain of our intellectual property in a restricted capacity. While we attempt to ensure that our intellectual property rights are protected when entering into business relationships, third parties may take actions that could materially and adversely affect our rights in or the value of our intellectual property.

We and our third party service providers rely extensively on information technology systems, and face cybersecurity incidents and cybersecurity threats, which can result in significant liability and reputational harm, incur increasing liabilities and costs, all of which may affect our financial performance and adversely affect our business.

We and our third party service providers, such as our cloud service providers that store, transmit and process data, rely on information technologies and infrastructure, which we use to manage our business, including digital storage of client marketing and advertising information and developing new business opportunities. Increased cybersecurity threats and attacks, such as security breaches, are becoming more sophisticated, pose a risk to our systems and networks. In addition, undiscovered vulnerabilities in the Company’s products or services could expose it to hackers or other unscrupulous third parties who develop and deploy viruses and other malicious software programs that could attack our products, services and business. Also, given the unpredictability of the timing, nature and scope of such cybersecurity threats and attacks, the Company may be unable to anticipate attempted security breaches and, in turn, implement adequate preventative measures. Security breaches, improper use of our systems and other types of unauthorized access to our systems, data, and information by employees and others may pose a risk that data may be exposed to unauthorized persons or to the public. We have access to sensitive data, personal data, and information that is subject to various data privacy laws and regulations, which have obligations that are triggered in the event of a breach. Our systems and processes to protect against, detect, prevent, respond to and mitigate cybersecurity incidents and our organizational training for employees to develop an understanding of cybersecurity risks and threats may be unable to prevent material security breaches, theft, modification or loss of data, employee malfeasance and additional known and unknown threats. Any breakdown or breach in our systems or data-protection policies, or those of our third-party service providers, could adversely affect our reputation or business. Furthermore, mitigating the risk of future cybersecurity threats or attacks could result in additional operating and capital costs in systems technology, personnel, monitoring and other investments.

The Company is consolidating its real estate footprint and may incur significant costs in doing so.

In 2020, MDC consolidated the real estate occupancy of its advertising and marketing agencies in New York City, in order to lower its leasing costs and improve collaboration among our agencies. In consolidation, many of MDC’s legacy properties will be or have been subleased or abandoned. In 2020, MDC incurred a charge of $22.7 million associated with the impairment of right-of-use lease assets and related leasehold improvements and the acceleration of variable lease expenses relating to these and similar actions. In addition, the Company is exploring opportunities for real estate consolidation in other markets. The Company may not be able to sublease the vacated office spaces on expected terms or at all. If we fail to sublet on expected terms the vacated leased offices, there could be a material adverse effect on our cash flows, financial condition and results of operations.

Future economic and financial conditions could adversely impact our financial condition and results.

Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, as well as specific budgeting levels and buying patterns. Adverse developments including heightened economic uncertainty could reduce the demand for our services, which could have a material adverse effect on our revenue, results of operations, cash flows and financial position.

As a marketing services company, our revenues are highly susceptible to declines as a result of unfavorable economic conditions.

Global economic conditions affect the advertising and marketing services industry more severely than other industries. In the past, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which include discretionary components that are easier to reduce in the short term than other operating expenses. This pattern may recur in the future. Decreases in our revenue would negatively affect our financial results, including a reduction of our estimates of free cash flow from operations.

If our clients experience financial distress, their weakened financial position could negatively affect our own financial position and results.

We have a diverse client base, and at any given time, one or more of our clients may experience financial difficulty, file for bankruptcy protection or go out of business. Unfavorable economic and financial conditions in the global economy could increase client financial difficulties resulting in reduced demand for our services, reduced revenues, delayed payments by clients, and increased write offs of accounts receivable.

Conditions in the credit markets could adversely impact our results of operations and financial position.

Turmoil in the credit markets or a contraction in the availability of credit would make it more difficult for businesses to meet their capital requirements and could lead clients to change their financial relationship with their vendors, including us. If that were to occur, it could materially adversely impact our results of operations and financial position.

The Company’s results of operations are subject to currency fluctuation risks.

Although the Company’s financial results are reported in U.S. dollars, a portion of its revenues and operating costs are denominated in currencies other than the U.S. dollar. As a result, fluctuations in the exchange rate between the U.S. dollar and other currencies, particularly the Canadian dollar, may affect the Company’s financial results and competitive position.

Goodwill, intangible assets and right-of-use assets may become impaired.

MDC and the Stagwell Subject Entities have both recorded a significant amount of goodwill and intangible assets in their consolidated financial statements in accordance with GAAP resulting from their acquisition activities, which principally represent the specialized know-how of the workforce at the agencies they have acquired. They both test, at least annually, the carrying value of goodwill for impairment, as discussed in Note 2 of the Notes to each of MDC’s and the Stagwell Subject Entities’ consolidated financial statements included or incorporated by reference herein. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. Going forward, if the Company concludes that any intangible asset and goodwill values are impaired, any resulting non-cash impairment charge could have a material adverse effect on our results of operations and financial position. See Note 8 of the Notes to MDC’s Consolidated Financial Statements for details on goodwill and intangible asset impairment recorded by MDC in the twelve months ended December 31, 2020. No impairment was recorded during the six months ended June 30, 2021 and the twelve months ended December 31, 2020 for the Stagwell Subject Entities.

In addition, MDC and the Stagwell Subject Entities recorded a significant amount of right-of-use assets in its consolidated financial statements in accordance with GAAP as a result of the adoption of Accounting Standards Codification, Leases (“ASC 842”). Upon a triggering event, we test the right-of-use assets for impairment. If a right-of-use asset is impaired, the charge could have a material adverse effect on our results of operations and financial position.

If the Company fails to maintain an effective system of internal control over financial reporting, the Company may not be able to accurately report its financial results or prevent fraud. As a result, investors could lose confidence in the Company’s financial and other public reporting, which would harm its business.

Effective internal control over financial reporting is necessary for the Company to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. In connection with the preparation of Stagwell Marketing Group’s consolidated financial statements as of December 31, 2020, 2019 and 2018 and for the years then ended, Stagwell Marketing Group identified material weaknesses in its internal controls over financial reporting including not designing or maintaining an effective control environment that meets Stagwell Marketing Group’s accounting and reporting requirements. Specifically, Stagwell Marketing Group did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting knowledge, experience, and training commensurate with its accounting and reporting requirements. This material weakness contributed to the following additional material weaknesses:

These material weaknesses have not been rectified as of the date of this offering circular. Any failure of the Company to remediate such material weaknesses, to implement required new or improved controls, or difficulties encountered in their implementation, could cause the Company to fail to meet its reporting obligations. In addition, any testing by the Company, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by the Company’s independent registered public accounting firm, as and when required, may reveal deficiencies in the Company’s internal control over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to its financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in the Company’s reported financial information.

Under the Company Certificate of Incorporation, non-employee directors will generally have no obligation to offer the Company corporate opportunities.

Directors of the Company who are not also employees of the Company will not have any duty to refrain from (i) engaging directly or indirectly in the same or similar business activities or lines of business that the Company does, (ii) doing business with any potential or actual customer or supplier of the Company, or (iii) employing or otherwise engaging any officer or employee of the Company. In the event that any such director acquires knowledge of a potential transaction or matter which may be a corporate opportunity for him or herself or another person and the Company, the Company will not have any expectancy in the corporate opportunity, and no director will have any duty to communicate or offer the corporate opportunity to us and may pursue or acquire such corporate opportunity for him or herself or direct such opportunity to another person.

The Issuer may be subject to adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain.

The Issuer is subject to tax in multiple tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that jurisdictional tax authorities may take a contrary view, which may have a significant impact on our global provision for income taxes. Additionally, as a pass-through entity for U.S. tax purposes, we are required to make periodic distributions to the Company to enable the Company to pay its taxes allocable to its investment in the Issuer, and we are required to make pro rata distributions to the other holders of our Common Units, and if the Company’s effective tax rate were to increase, our obligations to make tax distributions to the Company and the other holders of our Common Units will correspondingly increase.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The U.S. recently enacted significant tax reform, and certain provisions of the new law may adversely affect us. In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business. If U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, as well as our obligations to make tax distributions to the Company and the other holders of our Common Units, and our business, financial condition or results of operations may be adversely impacted.

Seasonal fluctuations in marketing, research, communications and advertising activity could have a negative impact on our revenue, cash flow and operating results.

Our revenue, cash flow, operating results and other key operating and performance metrics may vary from quarter to quarter due to the seasonal nature of our clients’ spending on the services we provide. For example, clients tend to devote more of their advertising budgets to the fourth calendar quarter to coincide with consumer holiday spending. Political advertising and related activity could also cause our revenue to increase during election cycles, which is most pronounced in even years, and decrease during other periods. If our growth rate declines or seasonal spending becomes more pronounced, seasonality could have a more significant impact on our revenue, cash flow and operating results from period to period.

If our available liquidity is insufficient, our financial condition could be adversely affected and we may be unable to fund contingent deferred acquisition liabilities, and any put options if exercised.

The Company maintains the Combined Credit Agreement, together with cash flow from operations, to fund its working capital needs and to fund the exercise of put option obligations and contingent deferred acquisition payments. If credit were unavailable or insufficient under the Combined Credit Agreement, our liquidity could be adversely affected and our ability to fund our working capital needs and any contingent obligations with respect to put options or contingent deferred acquisition payments could be adversely affected. The Stagwell Subject Entities made acquisitions for which they have deferred payment of a portion of the purchase price, with the deferred acquisition consideration generally payable based on achievement of certain thresholds of future earnings of the acquired company. In addition, a noncontrolling shareholder in an acquired business often has the right to require the relevant Stagwell Subject Entity to purchase all or part of its interest, either at specified dates or upon the termination of such shareholder’s employment with the subsidiary or death (put rights). Payments to be made by the Company in respect of deferred acquisition consideration and noncontrolling shareholder put rights may be significantly higher than the amounts estimated by the Stagwell Subject Entities and Company because the actual obligation adjusts based on the performance of the acquired businesses over time. If available liquidity is insufficient, Stagwell may be unable to fund contingent deferred acquisition payments.

The Company may not realize the benefits it expects from past acquisitions or acquisitions or other strategic transactions we may make in the future.

The Company’s business strategy includes ongoing efforts to engage in acquisitions of ownership interests in entities in the marketing communications services industry and other strategic transactions.

The success of acquisitions or strategic investments depends on the effective integration of newly acquired businesses into the Company’s current operations. Such integration is subject to risks and uncertainties, including realization of anticipated synergies and cost savings, the ability to retain and attract executives and clients, the diversion of management’s attention from other business concerns, and undisclosed or potential legal liabilities of the acquired company. The Company’s failure to address these risks or other problems encountered in connection with our past or future acquisitions and other strategic transactions could cause the Company to fail to realize their anticipated benefits, incur unanticipated liabilities and harm the Company’s business generally. The Company’s acquisitions and other strategic transactions could also result in dilutive issuances of the Company’s equity securities, the incurrence of debt, contingent liabilities, or amortization expenses, or impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could harm its financial condition or operating results. Furthermore, the anticipated benefits or value of the Company’s acquisitions and other strategic transactions may not materialize.

Capitalization

The following table sets forth the capitalization as of June 30, 2021 of the combined company on a pro forma basis and on an as adjusted basis giving effect to the offering and the application of proceeds as described under “Use of Proceeds.” You should read this table in conjunction with the MDC 2020 Annual Report, the MDC 2021 Q2 Report, “Unaudited Pro Forma Condensed Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Stagwell Subject Entities” and the Stagwell Marketing Group LLC and Subsidiaries financial statements and the related notes contained elsewhere in this offering circular.

(1) Excludes the unsecured Line of Credit. There were no amounts outstanding pursuant to the Line of Credit as of the date of this offering circular.

(2) Excludes the Combined Credit Agreement dated August 2, 2021.

Unaudited Pro Forma Condensed Combined Financial Information

Introduction

On December 21, 2020, MDC and Stagwell entered into the Transaction Agreement contemplating, among other things, the Transactions. The Stagwell Subject Entities comprise Stagwell Marketing and its direct and indirect subsidiaries. In this section, the Stagwell Subject Entities are referred to as “Stagwell”.

In respect of the Transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The unaudited pro forma condensed combined financial information assumes that the Transactions are accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to FASB Topic 805-10, Business Combinations, with MDC treated as the legal acquirer and Stagwell treated as the accounting acquirer. In identifying Stagwell as the acquiring entity for accounting purposes, MDC and Stagwell took into account a number of factors as of the date of this offering circular, including the relative voting rights and the intended corporate governance structure of Stagwell Inc. Stagwell is considered the accounting acquirer since it will control the board of directors of Stagwell Inc. and will have an indirect ownership interest in Stagwell Inc.’s only operating subsidiary through its approximately 69% ownership of the common units in the Issuer (as may be adjusted in connection with the Stagwell Restructuring). However, no single factor was the sole determinant in the overall conclusion that Stagwell is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion. Under the acquisition method of accounting, the assets and liabilities of MDC, as the accounting acquiree, will be recorded at their respective fair value as of the date the Transactions were completed.

The following unaudited pro forma condensed combined financial information gives effect to the Transactions. The unaudited Pro Forma Condensed Combined Balance Sheet is presented as if the Transactions had occurred on June 30, 2021. The unaudited Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 2020 and six months ended June 30, 2021 are presented as if the Transactions had occurred on January 1, 2020, the beginning of the earliest period presented. The unaudited pro forma condensed combined financial information is based on the historical consolidated financial statements of Stagwell and MDC, and the assumptions and adjustments set forth in the accompanying explanatory notes. This unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting where Stagwell is considered the acquirer of MDC for accounting purposes. See “Note 2 — Basis of Pro Forma Presentation” below.

The unaudited pro forma condensed combined financial information for the Transactions has been developed from Stagwell’s and MDC’s historical financial statements. MDC’s audited financial statements are contained in the MDC 2020 Annual Report, the MDC 2021 Q1 Report and the MDC 2021 Q2 Report, which are incorporated by reference into this offering circular. The acquisition of MDC will be accounted for as a business combination and reflected the application of acquisition accounting in accordance with ASC 805. The pro forma adjustments are based on preliminary estimates of the fair value of the assets acquired and liabilities assumed and information available as of the date of this offering circular. Certain valuations and assessments, including valuations of property, plant and equipment, contingent consideration, other intangible assets as well as the assessment of the tax positions and tax rates of the combined business, are in process and will not be completed until subsequent to the close of the Transactions. The estimated fair values assigned in this unaudited pro forma condensed combined financial information are preliminary and represent the current best estimate of fair value and are subject to revision.

On August 2, 2021, an aggregate of 179,970,051 Stagwell Inc. Class C Common Shares were issued to the Issuer in exchange for the Stagwell MDC Stagwell Holdings Inc. Contribution. The Stagwell Inc. Class C Common Shares do not participate in the earnings of Stagwell Inc. Additionally, an aggregate of 179,970,051 Issuer Common Units were issued to the Issuer in exchange for the Stagwell OpCo Contribution.

The fair value of the purchase consideration, or the purchase price, in the unaudited pro forma condensed combined financial information is estimated to be approximately $409.4 million. The purchase consideration consists of approximately 83 million shares of Class A and B common stock and common stock equivalents based on a per share price of $5.00.

Accounting Treatment for the Transactions and Related Pro Forma Adjustments

As previously noted, the Transactions are being accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to ASC 805, with MDC treated as the legal acquirer and Stagwell Media treated as the accounting acquirer. ASC 805 requires the allocation of the purchase price consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination. As explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial statements, the total purchase price to acquire MDC has been allocated to the assets acquired and assumed liabilities of MDC based upon preliminary estimated fair values at the date of acquisition, as if the acquisition had occurred on June 30, 2021. The fair value of the acquired assets and assumed liabilities as of the date of acquisition are based on preliminary estimates assisted, in part, by a third-party valuation expert. The estimates are subject to change upon the finalization of appraisals and other valuation analyses, which are expected to be completed no later than one year from the date of acquisition. Although the completion of the valuation activities may result in asset and liability fair values that are different from the preliminary estimates included herein, it is not expected that those differences would alter the understanding of the impact of this transaction on the consolidated financial position and results of operations of Stagwell Media or Stagwell Inc.

In connection with the Transactions, Stagwell Inc., Stagwell Media and MDC entered into the Tax Receivable Agreement, pursuant to which Stagwell Inc. agreed to pay Stagwell Media 85% of the cash savings, if any, with respect to U.S. federal, state, and local income tax or franchise tax that Stagwell Inc. actually realizes as a result of (a) any increases in tax basis attributable to redemptions or exchanges by Stagwell Media of Issuer Common Units for Stagwell Inc. Class A Common Shares or cash (an “Exchange”) and (b) tax benefits related to imputed interest deemed to be paid by Stagwell Inc. as a result of the Tax Receivable Agreement. Stagwell Inc. expects to benefit from the remaining 15% of cash savings, if any, that are realized. Due to the uncertainty in the amount and timing of future Exchanges, the unaudited pro forma consolidated financial information assumes that no Exchanges have occurred and therefore no increases in tax basis in Stagwell Inc.’s assets or other tax benefits that may be realized thereunder have been assumed in the unaudited pro forma consolidated financial information. However, if all of the Issuer Common Units subject to the Tax Receivable Agreement were so redeemed or exchanged, Stagwell Inc. would recognize a deferred tax asset of approximately $82 million and a liability of approximately $70 million, payable over the 15-year period from the assumed date of such Exchanges, assuming (i) all Exchanges occurred on the same day at $5.00 per share; (ii) a constant corporate tax rate of 28%; (iii) Stagwell Inc. will have sufficient taxable income to fully utilize the tax benefits in the year the related tax deduction arises; and (iv) no material changes in tax law. The actual amount of deferred tax assets and related liabilities that Stagwell Inc. will recognize will differ based on, among other things, the timing of the Paired Interest Exchanges, the price of Stagwell Inc. Class A Common Shares at the time of the exchange, and the tax rates then in effect.

See the accompanying notes to the unaudited pro forma condensed combined financial statements

See the accompanying notes to the unaudited pro forma condensed combined financial statements

See the accompanying notes to the unaudited pro forma condensed combined financial statements

1. Description of the Transaction

As part of the MDC Reorganization, (i) the Issuer converted into a limited liability company that holds MDC’s operating assets. Following the MDC Reorganization, (i) and to which Stagwell Media contributed to the Issuer the equity interests of the Stagwell Subject Entities in exchange for 179,970,051 common membership interests of the Issuer, and (ii) Stagwell Media contributed to Stagwell Inc. an aggregate amount of cash equal to $1,800 in exchange for Stagwell Inc. Class C Common Shares. Stagwell Media was deemed to be the accounting acquirer under ASC 805 and thus MDC’s net assets are measured at their fair value.

The purchase price allocation has been derived from estimates of the fair value of the tangible and intangible assets and liabilities of MDC, using established valuation techniques. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially affect Stagwell Inc.’s results of operations. The total purchase price has been allocated on a preliminary basis to identifiable assets acquired and liabilities assumed, based upon valuation procedures performed to date. As of the date of this offering circular, the valuation studies performed to determine the fair value of the assets acquired and liabilities assumed and the related allocations of purchase price are preliminary. The final determination of the fair values of the identifiable tangible and intangible assets acquired and liabilities assumed may differ from the amounts reflected in the pro forma purchase price allocation, and any differences may be material. The purchase price allocation will be finalized as soon as practicable within the measurement period, but in no event later than one year following the acquisition date.

2. Basis of Pro Forma Presentation

Basis of Preparation of the Pro Forma Information

The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11, as amended by SEC Final Rule Release No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses. In accordance with Release No. 33-10786, the unaudited condensed combined pro forma balance sheet and statements of operations reflect transaction accounting adjustments, as well as other adjustments deemed to be directly related to the Transactions, irrespective of whether or not such adjustment is deemed to be recurring.

The unaudited pro forma condensed combined financial information is presented to illustrate the estimated effects of the Transactions. The unaudited Pro Forma Condensed Combined Balance Sheet is presented as if the Transactions had occurred on June 30, 2021. The unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2021 and year ended December 31, 2020 are presented as if the Transactions had occurred on January 1, 2020. This pro forma information is provided for informational purposes only and is based on available information and reasonable assumptions. The pro forma information does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Stagwell Inc. would have been if the Transactions had occurred on the dates indicated, nor is it necessarily indicative of the future consolidated results of operations or consolidated financial position of Stagwell Inc. The actual financial position and results of operations of Stagwell Inc. will likely differ, perhaps significantly, from the pro forma amounts reflected herein due to a variety of factors, including access to additional information, changes in value not currently identified, and changes in operating results following the dates of the Transactions and the pro forma financial information.

Accounting for the Transaction

The accompanying unaudited pro forma condensed combined financial statements give effect to the Transactions. The unaudited pro forma condensed combined financial information is based on the historical consolidated financial statements of Stagwell Media and MDC, as well as the assumptions and adjustments set forth in these notes. Adjustments reflected in the unaudited pro forma condensed combined financial statements include the balance sheet and statement operations impacts of the application of acquisition method of accounting in accordance with ASC 805. Adjustments also reflect the impact that discrete transactions directly related to the Transactions have had or will have on the results of operations and financial condition of Stagwell Inc.

ASC 805 requires the allocation of purchase consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination. For this purpose, fair value shall be determined in accordance with the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”). Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective and can involve a high degree of estimation.

The determination of the fair value of the identifiable assets acquired and liabilities assumed upon consummation of the Transactions, as well as the allocation of the estimated consideration to these identifiable assets and liabilities, is preliminary as of the date that the unaudited pro forma condensed combined financial information has been prepared. Accordingly, the fair values of the identifiable assets acquired and liabilities assumed may be revised as additional information becomes available and is evaluated. Since the unaudited pro forma condensed combined financial information has been prepared based upon preliminary estimates of consideration and the fair values of the identifiable assets acquired and liabilities assumed from MDC, the actual amounts eventually recorded in connection with acquisition accounting, including the identifiable intangibles and goodwill, could differ materially from the information presented. However, Stagwell Media’s management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Transactions, including the application of the acquisition method of accounting, based on information available at the time. Management further believes that the pro forma adjustments give appropriate effect to the assumptions that have been made and those assumptions have been properly applied.

3. Calculation of purchase Price and Preliminary Allocation of Estimated Fair Value of Assets Acquired and Liabilities Assumed

The total preliminary acquisition purchase price has been calculated as follows:

The equity portion of the purchase price is based on an MDC share price of $5.00. The value of the purchase price consideration will change based on fluctuations in the market price of the MDC Canada Common Shares. The equity portion of the purchase price will vary based on the market price of the MDC Canada Common Shares upon consummation of the acquisition. MDC believes that a 10% fluctuation in the market price of the MDC Canada Common Shares is reasonably possible based on historical volatility, and the potential estimated effect on purchase price would be:

The purchase price is allocated to the underlying assets acquired and liabilities assumed based on their respective fair values, with any excess purchase price allocated to goodwill. The purchase price was allocated as follows:

4. Condensing of Stagwell’s Historical Balance Sheet information impacting the pro forma Balance sheet of Stagwell Inc.

Stagwell Balance Sheet Reclassification Adjustments:

Certain balances within Stagwell’s historical balance sheet were combined to align with presentation of MDC. The following is a summary of the condensing adjustments included in the unaudited pro forma condensed combined balance sheet (in thousands):

5. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The following summarizes and provides explanations for the pro forma adjustments included in the unaudited pro forma condensed combined balance sheet presented as of June 30, 2021:

The following table summarizes the estimated fair values of the identifiable intangible assets acquired upon consummation of the Transactions, the estimated useful lives of the identifiable intangible assets, and the amount by which MDC’s historical intangible asset balance was adjusted on a pro forma basis to reflect the identifiable intangible assets at their fair value:

Customer relationship useful lives vary based on specific customer data at the reporting unit level. MDC has assigned useful lives to the individual intangible assets based on the underlying cash flows expected from each reporting unit’s customer base.

The preliminary estimates of fair value and estimated useful lives could differ from the amounts ultimately determined upon completion of the valuation analysis, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial statements. A change in the valuation of the acquired identifiable intangible assets would result in an offsetting change of the same amount to the amount of goodwill recorded in connection with the Transactions.

5(k) i

5(k) ii

5(k) iii

5(k) iv

5(k) v

5(k) vi

The net tax attributes of $48,989 retained by Stagwell Inc. consist of deferred tax assets relating to U.S. corporate tax losses and tax credits retained by Stagwell Inc. of $40,780 and deferred tax liabilities attributable to Stagwell Inc.’s investment in the Issuer of $89,769. The liquidation preference of the MDC Canada Series 4 Shares and MDC Canada Series 6 Shares accrete at 8.0% per annum, compounded quarterly.

6. Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations

The following analysis summarizes and provides explanations for the pro forma adjustments included in the unaudited pro forma condensed combined statements of operations presented for six months ended June 30, 2021 and twelve months ended December 31, 2020.

The awards previously issued were a combination of equity awards subject to ASC 718 and profit sharing/ performance bonus awards subject to ASC 710. In both cases the awards were not considered probable of vesting and no prior compensation expense was recognized.

A total of approximately 12 million FAF units were issued, which are exchangeable for Class A shares of Stagwell Inc. Approximately 7 million units vested immediately upon the closing of the Transactions and approximately 5 million will vest over a six-month service period.

The compensation expense is calculated as the number of units multiplied by Stagwell Inc.’s Class A Common share price of $5.00, which is considered the grant date fair value of all the awards and in accordance with the accounting treatment for modified and/or new awards under ASC 718 and ASC 710.

Pro forma amortization expense has been recorded based upon the following preliminary fair values and estimated useful lives assigned to the tradenames and acquired customer relationship intangible assets:

6(f) i

6(f) ii

6(f) iii

6(f) iv

Shares exchanged for Stagwell net assets upon completion of the Transactions do not participate in the earnings of Stagwell Inc.. As such, basic EPS is not affected for the Stagwell Class C Shares issued in connection with the Stagwell New MDC Contribution. This assumption is consistent with the assumption that the Transactions were consummated as of January 1, 2020 for purposes of preparing the unaudited pro forma combined statements of operations.

Management’s Discussion and Analysis of the Financial Condition and Results of the Stagwell Subject Entities

The following discussion and analysis are based on and should be read in conjunction with the Stagwell Unaudited Condensed Consolidated Financial Statements and the notes related thereto included elsewhere in this offering circular, which have been prepared in accordance GAAP and derived from the financial statements of Stagwell Marketing Group LLC. This Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Stagwell Subject Entities (“MD&A”) contains forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” in this offering circular.

In this section, the Stagwell Subject Entities are referred to as “Stagwell”, “the Company,” “we,” “our,” or “us”.

Executive Summary

On December 21, 2020, MDC and Stagwell Media announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the Stagwell Subject Entities. The Company formally merged with MDC to form Stagwell Inc. on August 2, 2021.

The Stagwell Subject Entities comprise Stagwell Marketing and its direct and indirect subsidiaries. Stagwell Marketing is a Delaware limited liability company that was formed on March 9, 2017 and is governed by the terms and conditions of a limited liability agreement effective as of the same date. Stagwell Media owns all of the equity interests of Stagwell Marketing through Stagwell Marketing Group Holdings LLC. Stagwell Media is managed by The Stagwell Group LLC, a registered investment adviser. Stagwell Marketing was formed to hold the previously existing interests of Stagwell Media in its portfolio of marketing services companies and the contribution by Stagwell Media to Stagwell Marketing of all of those interests on March 9, 2017 was accounted for by Stagwell Media at historical cost as a transaction under common control.

Stagwell is an independent, full service, technology-driven marketing consultancy working at the crossroads of the art and science of creativity. We excel at offering clients simplicity and speed of execution. As of July 31, 2021, the Stagwell Subject Entities have over 3,960 employees operating in more than 20 countries around the world. For more information about the Stagwell business, see the Stagwell Unaudited Condensed Consolidated Financial Statements included elsewhere in this offering circular and the section entitled “Summary—Legacy Stagwell Subject Entities.”

Stagwell conducts its business through its operating companies (referred to as “Brands”), each of which is included in one of six reportable segments, which include the following: (i) Digital Transformation and Performance Marketing (“Digital — Marketing”), (ii) Digital Content (“Digital — Content”), (iii) Research for Technology and Entertainment (“Research — Technology”), (iv) Research for Corporate (“Research — Corporate”), (v) Communications, Public Affairs and Advocacy (“Communications, Public Affairs and Advocacy”), and (vi) All Other Brands (“All Other”). The All Other reportable segment reports the operating results of Brands not included in our other segments and that generally have dissimilar economic characteristics. As a result, the All Other reportable segment may report different margin profiles than other segments, due to the following: (i) this segment includes Stagwell’s emerging Software-as-a-Service (“SaaS”) products that are receiving significant paid marketing support out of the operating expense of the business for customer acquisition and (ii) this segment includes Stagwell’s pharmaceutical marketing line of business which can be more short-term-project-based in nature due to the irregular nature of when pharmaceutical product launches occur and when approval is given for them by governmental authorities. In addition, Stagwell reports its corporate office expenses incurred in connection with the strategic resources provided to the operating companies, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate. Corporate provides client and business development support to the operating segments as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions. The following discussion focuses on the operating performance of the Company for the three and six months ended June 30, 2021 and June 30, 2020 and the financial condition of the Company as of June 30, 2021. This analysis should be read in conjunction with the Stagwell Unaudited Condensed Consolidated Financial Statements included elsewhere in this offering circular and Note 18 of the Notes to the Stagwell Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 included elsewhere in this offering circular for a description of each of our reportable segments.

Recent Developments

Beginning in December 2019, an outbreak of coronavirus (“COVID-19”) emerged in China and has spread to other parts of the world, including locations where the Company conducts business. On March 11, 2020, the World Health Organization announced COVID-19 had been declared a pandemic, and on March 13, 2020 the U.S. President announced a National Emergency relating to the disease. The spread of COVID-19 has caused significant volatility in the United States and international markets and, in many industries, including some in which our clients operate, business activity has virtually shut down entirely. The COVID-19 pandemic has negatively impacted the Company’s results of operations, statement of financial position and cash flows due to its impact on certain of our Brands, particularly those that serve the travel and entertainment industries. The travel vertical in our Digital Content segment, has experienced ongoing challenges throughout the first half of 2021 as marketers continue to cancel orders or defer media placements at airplanes and in hotels. Further, multiple airline partners have reduced or eliminated their publications, and airport concessionaires have closed due to lack of passenger traffic. Our Research—Technology segment, which specializes in entertainment testing and forecasting, remained negatively impacted during the first half of 2021 as theatrical releases and productions remained below pre-pandemic levels. Alternatively, growth in market research related to streaming services and technology products has accelerated. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Stagwell Subject Entities—Reportable Segments Results of Operations.”

We have taken actions in response to the pandemic’s impact to our businesses, including working closely with our clients to address their evolving service requirements and transitioning to a remote work environment, rationalizing our compensation and general and administrative expenses, and monitoring liquidity. The impact of the pandemic and the corresponding actions we have taken are reflected in our judgments, assumptions and estimates in the preparation of the financial statements. The full extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including additional actions taken to contain COVID-19 or treat its impact, among others. Our business and financial results could be materially and adversely impacted.

Financing

On August 2, 2021, we increased the commitments under our existing credit agreement with a syndicate of banks led by JPMorgan Chase Bank, N.A (the “Expanded JPM Syndicated Facility”) by $175 million from $325 million to $500 million in the context of entry into the Combined Credit Agreement. On March 18, 2020, commitments under our existing credit agreement with a syndicate of banks led by JPMorgan Chase Bank, N.A (the “New JPM Syndicated Facility”) were increased by $60 million from $265 million to $325 million. On November 13, 2020, we amended certain terms of our New JPM Syndicated Facility in contemplation of the Proposed Transactions and entered into a term loan agreement (the “JPM Credit Agreement”) that provided us with a Delayed Draw Term Loan A in an aggregate principal amount of $90.0 million. Each of the foregoing New JPM Syndicated Facility and JPM Credit Agreement are now replaced or refinanced by the Combined Credit Agreement, which increases the commitments under the New JPM Syndicated Facility. For additional information about the terms of our debt obligations see “—Liquidity and Capital Resources — Total Debt.”

Significant Factors Affecting our Business and Results of Operations

The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our Brands offer. A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain an agency that it may have previously worked with. In addition, if the client is merged or acquired by another company, the marketing communication firm is often changed. Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery.

Seasonality

Historically, we typically generate the highest quarterly revenue during the fourth quarter in each year with a significant increase during the even years. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season. The even years benefit from the U.S. election cycles.

Non-GAAP Measures:

Stagwell reports its financial results in accordance with GAAP. Additionally, we have included certain non-GAAP financial measures that we use to operate the business. We believe these measures provide useful supplemental information to both management and readers of this offering circular when evaluating our financial performance and financial condition. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP.

The key metrics that we use to evaluate our financial performance are (1) organic revenue and inorganic revenue (as defined below), and (2) Adjusted EBITDA.

We use two non-GAAP measures — organic revenue and inorganic revenue (as defined below) when evaluating growth or decline in our revenues. These measures permit us to isolate the changes in revenue of our existing businesses from period to period, which are defined as the businesses that were owned for the entirety of both periods being compared.

“Net revenue” is GAAP revenue adjusted to exclude certain third-party direct costs when the Company acts as principal for the services rendered in the client arrangement.

“Inorganic revenue” consists of (i) for acquisitions during the current year, the revenue effect from such acquisitions as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenue for the applicable periods.

“Organic revenue” is calculated by subtracting both the foreign exchange and acquisition (disposition) components from total revenue. “Organic revenue growth” and “organic revenue decline” refers to the positive or negative changes in revenue that were not attributable to the effects of foreign exchange or acquired run rate revenue from acquisitions. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the Company’s Brands that have been held throughout each of the comparable periods presented, and (b) inorganic revenue.​

We use the term “existing brands” or “existing businesses” to mean businesses that were owned for the entirety of both years being compared. We use the term “acquired brands” or “acquired businesses” to refer to businesses that were acquired during the periods being compared.

We exclude the effect of acquisitions and dispositions when evaluating period-to-period organic revenue because the nature, size, timing and number of acquisitions and divestitures can vary dramatically from period-to-period, obscuring underlying business trends and making comparisons of long-term performance difficult. We exclude the effect of currency translation from organic revenue because currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends.

We believe comparing organic revenue from period to period illustrates the underlying financial performance of our businesses including the impact of management’s oversight and decisions, the impact of our investments and resource allocation decisions on our business, and is indicative of the market conditions our businesses operate in.

We completed acquisitions during the periods reported for certain segments, for which we describe inorganic revenue below, as well as the corresponding organic revenue growth (decline). In 2020, these segments were Digital – Marketing, Digital – Content, and Communications, Public Affairs and Advocacy.

“Adjusted EBITDA” is defined as net income adjusted for (a) interest expense, (b) provision for income taxes, (c) depreciation and amortization expense, (d) other income (expenses), (e) equity in earnings (losses) of unconsolidated affiliates, (f) deferred acquisition consideration adjustments, and (g) other items, net. Other items, net includes items such as acquisition-related expenses, other non-recurring items and other restructuring costs.

We believe Adjusted EBITDA is a useful measure for investors to evaluate the performance of our business. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for net income calculated in accordance with GAAP or operating income calculated in accordance with GAAP.

This section includes a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, as presented in the tables below.