SecProbe.io

CORRESP
1
filename1.htm

      January 13, 2009

      Via FedEx and
Edgar

      Mr. Larry
Spirgel

      Assistant
Director

      Mail Stop
0407

      Division
of Corporation Finance

      Securities
and Exchange Commission

      450 Fifth
Street, N.W.

      Washington,
D.C.  20549

                RE:

                MDC
      Partners, Inc.

      Form 10-K for Fiscal Year Ended
December 31, 2007

      Filed March 10, 2008

      Form 10-Q Fiscal Quarter Ended
September 30, 2008

      File No. 1-13718

      Dear Mr.
Spirgel:

      Set forth
below are the responses of MDC Partners Inc. (the “Company”) to the comments of
the Staff of the Division of Corporation Finance, which were set forth in your
letter dated December 11, 2008 (the “December 11th Letter”) regarding the
Company’s above-referenced filings.  The responses to the Staff’s
comments are provided in the order in which the comments were set out in the
December 11th Letter and are numbered correspondingly.

      The
Staff’s comments, indicated by bold, are followed by responses on behalf of the
Company.  Page references below are to the applicable Exchange Act
filing, as the case may be.

      Form 10-K for Fiscal Year
Ended December 31, 2007

      Management’s Discussion and
Analysis of Financial Condition and Results of Operations, page
14

                1.

                We
      note on page 15 that normally the fourth quarter generates the highest
      quarterly revenues in a year and it has been the period in which the
      highest volumes of media placements and retail related consumer marketing
      occur.  In your next filing, please provide a comprehensive
      discussion of your 2008 fourth quarter results so that it is transparent
      to readers how the economic downturn is impacting your operations and
      liquidity.  In preparing your disclosure, please consider the
      following items:

                ·

                If you have experienced an
      unusually poor fourth quarter, this fact and its ramifications should be
      made clear to investors.

                ·

                Discuss any known trends or
      events likely to impact your results of operations or liquidity in the
      upcoming year, including potential reductions in revenues from any of your
      significant customers or from any particular industry.  Clearly
      disclose the extent to which your revenues are concentrated in certain
      industries and the impact that this concentration may have on your results
      of operations and liquidity, as discussed in SOP
    94-6.

                ·

                Your discussion should address
      the operations of your segments and/or within geographic regions to the
      extent necessary for a clear understanding of your
      circumstances.

                ·

                You should explain the impact
      of tightening credit markets and stock market turmoil has had and is
      likely to continue to have on the
  company.

      The
Company confirms that it will discuss the foregoing items in its next Form 10-K
filing.

                2.

                In
      light of the recent economic turmoil and the significant decrease in the
      price of your common shares, explain to us the consideration that you have
      given to a possible impairment of your goodwill, other intangible assets
      and long-lived assets.  In your next filing, include clear and
      robust disclosure regarding the facts and circumstances leading to any
      recognized impairment.  If no impairment is required to be
      recognized despite the presence of impairment indicators, discuss the
      possibility of a future impairment and the sensitivity of your impairment
      analysis to management’s estimates.

      The
Company tests for goodwill impairment on an annual basis on October 1st of each
year. On a quarterly basis, the Company considers all factors that could give
raise to a triggering event which would require an impairment test of goodwill,
other intangibles or long-lived assets prior to the annual test.  For
each of the first three quarters in 2008, the Company determined that a
triggering event had not occurred and as such no assets where deemed to have
been impaired. The Company is currently completing its annual test of impairment
and will discuss the foregoing items in its next Form 10-K filing.

      Note
2.  Significant Accounting Policies, page 47

      Put Options, page
53

                3.

                It
      is unclear to us how your accounting policy for put options considers the
      effect of the exercise price in determining the balance for minority
      interests at each balance sheet date.  Tell us how you applied
      the guidance in EITF Topic D-98 in accounting for these put
      options.

          2

      As
described in note 2 and in note 17 of Form 10-K, the minority interest
shareholders of certain subsidiaries have the right to require the Company to
acquire their ownership interest under certain circumstances pursuant to a
contractual arrangement and the Company has similar call options under the same
contractual terms.  The amount of consideration under the put and call
rights is not a fixed amount, but rather is dependent upon various valuation
formulas and on future events, such as the average earnings of the relevant
subsidiary through the date of exercise, the growth rate of earnings of the
relevant subsidiary through the date of exercise, etc.

      The put
and call rights are not freestanding separately tradable instruments and were
established pursuant to the various shareholder agreements and LLC operating
agreements.  In certain cases, the shares held by the minority
shareholders are not transferable to a third party and in the event they are
transferable, the acquirer is subject to the same put and call options under the
applicable agreement.  The subsidiaries are not limited life
entities.  The original acquisitions are accounted for as a business
combination under FAS 141.

      The
Company concluded that the put and call rights were excluded from the scope of
SFAS 150 because the put and call rights are not freestanding, required to
travel with the underlying shares upon a transfer, and impose a stated
requirement that invalidates the rights and obligations of the
shares.

      The
Company also concluded that the put and call rights are not derivatives under
paragraph 9 of SFAS 133, as amended, as their terms do not require or permit net
settlement.  Thus, we believe the put and call rights are outside the
scope of SFAS 133.

      The
Company also concluded that the put and call rights are outside the scope of
EITF 00-04 since these arrangements do not meet the terms of Derivative 1,
Derivative 2 or Derivative 3 as described in the
Abstract.  Specifically, they are not fixed price forward contracts or
fixed price put or call options or total return swaps.

      EITF
Topic D-98 covers the classification and measurement of redeemable securities,
specifically focused on Rule 5-02.28 of Regulation S-X which addresses the
treatment of preferred securities that are redeemable by the issuer. D-98
expands that guidance for other equity instruments including common stock,
derivative instruments, noncontrolling interests and share-based payment
arrangements that are classified as equity pursuant to FAS 123(R). As stated
above, these put and call rights are neither freestanding nor are they
considered a component of equity for the Company.  Therefore, the
Company currently believes that the disclosure requirements of paragraph 41 of
D-98 is the applicable section of this guidance.

          3

      Notwithstanding
the foregoing, the Company believes that the put options should be given some
accounting recognition.  The Company believes that there should be a
charge to minority interest expense over the life of the instrument to reflect
the excess, if any, of the exercise price over the fair value of the minority
shares at the date of the option being exercised – i.e. the loss on the
put.  No recognition would be given to any gain on the put option
(i.e. if the exercise price is less than the fair value of the minority interest
shares).

      The
Company believes that over the term that the option is outstanding, minority
interest expense (“MI”) in the income statement should reflect a charge for the
excess of (i) the present value of the exercise price of the put option over
(ii) the current fair value of the MI shares.  The Company also
believes that in any given year, the minority interest expense should be
calculated based on the sum of a) MI’s otherwise share of net earnings and b)
the change in the excess put exercise price calculated above, if
any.  Minority interest on the balance sheet should be the sum of (1)
the original NBV  of MI and (2) the sum of (a) MI’s cumulative share
of earnings (net of distributions) and (b) the difference between the then FMV
of the MI shares and the then present value of the put price.  This
practice will be changed in 2009 (See below).

      Following
this approach, the Company only records the initial acquisition of shares and no
further increase to goodwill and minority interest based on the then FMV of the
business (i.e., the goodwill would reflect as though the Company owed its equity
interest and not 100%).  The additional goodwill recorded at the time
the option is exercised will be the difference between the fair value of the
additional business purchased and the carrying value of minority
interest.  That is, the excess of the put option exercise price over
the fair value of the minority interest would have already been
expensed.  Minority interest has not been treated as part of
equity.  This practice will be changed in 2009 (See
below).

      For
balance sheet presentation purposes minority interest would have been increased
by the excess of the put amount over the fair value of the minority owned
percentage covered by the “puts”.  Through December 31, 2007, minority
interest for these puts has never been adjusted, since fair value of the
minority interests covered by the puts exceeded the redemption amount of the
puts.

      Under
guidance from EITF D-98 the Company’s policy relating to accounting for puts is
in accordance with GAAP.  The Company will acquire at least equal
value (minority interest) in exchange for cash and company stock, it any issued;
i.e., the put amount.  (See note 17 of Form 10-K.)

      Upon the
adoption of FAS 141 (R) and FAS 160 the Company intends to record the initial
carrying amount of these put and call rights based on the current redemption
amounts as an adjustment to retained earnings, and an adjustment to temporary
equity – Noncontrolling Interest.  Future acquisitions of these
Noncontrolling Interests will be recorded as equity adjustments; i.e., no
additional adjustments to intangibles and goodwill.

          4

      Note
4.  Acquisitions, page 54

      2007 Acquisitions, page
54

                4.

                Tell
      us how you accounted for the additional payments of $1,500 that you will
      be required to make relating to the acquisition of Redscout,
      LLC.  Tell us where you recorded the offset to the accrual of
      deferred acquisition consideration.

      The
Company accounted for the additional payments of $1,500 relating to the
acquisition of Redscout, LLC as additional purchase price and as such was
allocated to goodwill.

      Note 8.  Goodwill
and Intangible Assets, page 61.

                5.

                Tell
      us the components of the goodwill of $14,383 that you acquired during the
      year ended December 31, 2007.  In this regard, we note your
      disclosure at Note 4 regarding goodwill acquired in your acquisitions of
      VitroRobertson LLC, Redscout LLC, and HL Group Partners LLC, totaling
      $6,523.

      The
components of the goodwill of $14,383 that was acquired in 2007 consist of the
following acquisitions; Redscout LLC ($4,206), HL Group Partners LLC ($3,442),
Northstar Research Partners ($469), VitroRobertson LLC ($375), Zyman Group LLC
($91), Trend Core LLC ($52) for a total of  $8,635 and an earn-out
payment for the 2004 acquisition of Bruce Mau Design Inc of $1,386. In addition,
during 2007, we discovered an error in the recording of the acquisition of
Crispin, Porter and Bogusky (CPB”).  In 2004, we recorded the
acquisition of CPB using VIE accounting but neglected to record deferred income
taxes related to identifiable intangibles which would be amortized for book
purposes but not tax purposes.  The adjustment was recorded in
November 2007 and resulted in an increase in goodwill of $4,362 and a
corresponding increase in deferred income taxes.  This adjustment did
not have any effect on the 2007 income statement.  We also reviewed
the potential effect of this adjustment on prior years and determined that the
adjustments would have been minimal and clearly not material to our financial
position or operations.

      Definitive Proxy Statement
Incorporated by Reference into Part III

      Compensation Discussion and
Analysis, page 12

      Comparator Companies, page
16

          5

                6.

                We
      note your references to certain comparator companies (including Omnicom,
      WPP Group, Interpublic, Harte Hanks, Vlassis, and
      Doubleclik).  It appears that the compensation committee may
      benchmark total compensation levels to your comparator
      group.  Refer to Regulation S-K Compliance and Disclosure
      Interpretations, Question and Answer 118.05, available at www.sec.gov/divisions/corpfin/guidance/regskinterp.htm.  If
      you engage in benchmarking, please confirm that you have identified all of
      the companies considered by you or Mercer in conducting the benchmarking
      analysis.  In future filings, please provide additional detail
      about how the comparator information was used in making compensation
      decisions with respect to your named executive officers in your most
      recent fiscal year.

      In 2007
and 2008, the Company’s Compensation Committee did not formally benchmark total
compensation levels to its comparator group.  The Company confirms
that it will provide additional detail about how the comparator information may
be used in making compensation decisions with respect to named executive
officers.

      Incentive Awards Earned
Based on 2007 Performance, page 16

                7.

                We
      note your references to various pre-approved individual and corporate
      performance criteria and targets connection with determination of your
      incentive awards.  Please disclose these pre-approved criteria
      and targets in future filings.  To the extent the targets are
      not stated in quantitative terms, disclose how the compensation committee
      determined the officer’s achievement levels for that performance
      measure.  If you believe that disclosure of performance goals is
      not required because it would result in competitive harm such that you may
      omit this information under Instruction 4 to Item 402(b) of Regulation
      S-K, please provide in your response letter detailed explanation of such
      conclusion.  If you believe you have a sufficient basis to keep
      the information confidential, disclose in future filings how difficult it
      would be for the executive or how likely it would be for you or a business
      unit to achieve the undisclosed performance goal.  General
      statements regarding the level of difficulty or ease associated with
      achieving the goals are not sufficient.  In discussing how
      difficult it will be for an executive or how likely it will be for you or
      a business unit to achieve the performance goals, provide as much detail
      as necessary without providing info