Stagwell buys out digital agency Instrument for $160 million

Logos for Stagwell and Instrument

The holding company owned 51% of the agency through its original deal with MDC Partners.

Stagwell Group is buying out the remaining 49% independent stake it did not own in digital transformation agency Instrument, the holding company said on Wednesday. The deal includes a fixed payment of $160 million spread over a three-year period split between cash and stock. Terms were not disclosed.

Portland-based Instrument sold a 51% majority stake to MDC Partners in 2018. The digital transformation agency started out as a two-person web design shop in Vermont, and now does digital transformation, direct-to-consumer and omnichannel experiences for clients. 

Since 2006, the agency has grown at a rate of roughly 30% annually, said cofounder and CEO Justin Lewis. Instrument counts Nike, Google, Salesforce and Epic Games among its client roster.

Instrument’s previous deal structure with MDC Partners, with which Stagwell merged in August, included a seven-year uncapped earn out period. Now, Instrument is fully owned by Stagwell, and the deal is structured with incentives tied to the holding company’s stock price, as opposed to the agency’s individual performance. 

“We’ve aligned our efforts to Stagwell’s efforts,” Lewis said. “We had a more traditional earn out program before that was largely about maxing your own financials out.”

Creating joint financial incentives has been a growing focus for holding companies, which are increasingly being asked by clients to deliver integrated services. However, that’s often difficult to achieve when agencies are only motivated by their own financial performance. 

“It’s a daily conflict of interest to be a partially-owned agency in a holding company,” Lewis said. “In the previous deal, we were not all that motivated by the stock price; we were focused on ourselves.”

While giving up the uncapped earnout may be a personal sacrifice for Instrument’s executive team, it creates more stability for the agency and the parent company alike, while delivering more value to investors. On an uncapped earnout, agency founders are often incentivized to pursue unsustainable growth at all costs to achieve the best sale price, Lewis explained.

“It creates a ton of liability for the parent company,” he said. “It also can create a real fictitious sense of growth beyond what is sustainable. We've seen this backfire multiple times In other holding companies. We chose stability for everybody vs. putting more dollars in our pockets.”

Instrument is already starting to feel its motivation shift. For instance, Lewis is coaching a Stagwell sister agency on a big client pitch that would be shared with Instrument. 

“When we were [owned by] MDC, the culture was a bunch of great agencies that didn’t really care about one another’s performance. There wasn’t any cross-agency collaboration,” he said. “If I were going to pitch against one of those agencies, I was going to win. Now, immediately I’m like, ‘the greater good is more important to me.’”

With the catalyst to collaborate, Instrument’s digital transformation chops can help Stagwell “create more defensive barriers around [client] relationships,” Lewis said. “We do a lot of strategy work around DTC offerings and omnichannel experiences. These digital services are more relevant than ever.”

Instrument is the last agency from the MDC portfolio that has restructured its agreement with Stagwell. 

While Lewis and his executive team are entitled to receive the fixed-fee from the deal no matter what, the motivation to stay and chart Instrument’s next phase of growth under Stagwell is strong. 

“It’s pretty rare you can create a platform entrepreneurs want to be part of after they’ve earned out,” he said. “I am bought in. We are going to grow this thing and be formidable in the market.”


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