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CORRESP
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filename1.htm

    Unassociated Document

    February
15, 2011

    Via FedEx and
Edgar

    Mr. Larry
Spirgel

    Assistant
Director

    Division
of Corporation Finance

    Securities
and Exchange Commission

    100 F
Street NE

    Washington,
D.C.  20549

              RE:

              MDC
      Partners, Inc.

              Form
      10-K for Fiscal Year Ended December 31, 2009

              Filed March 10,
      2010

              Form
      10-Q Fiscal Quarter Ended September 30, 2010

              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
follow-up letter dated January 28, 2011 (the “January 28th
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 January 28th 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.

    Form 10-K for Fiscal Year
Ended December 31, 2009

    Item 1.A.  Risk
Factors, page 6

    We are a holding
company…page 10

              1.

              We
      note your response to comment two from our letter dated December 15,
      2010.  Please explain the restrictions placed on the transfer of
      cash from the subsidiaries to the parent company by the dividend surplus
      laws and the partnership agreements with the minority
      shareholders.  Please clarify whether you have included these
      restrictions in your calculation of restricted net assets as of December
      31, 2009.

    At the
request of the Staff, the Company is clarifying its response to Comment #2 from
the Staff’s letter dated December 15, 2010.  The Company’s calculation of
restricted net assets (less than 1% of total assets as of December 31, 2009)
includes all statutory and contractual restrictions placed on the transfer of
cash from subsidiaries to the parent, other than the restrictions on client cash
advances described in the Company’s previous response.  In particular, as
of December 31, 2009, statutory dividend surplus laws had no effect on the
transfer of net assets from subsidiaries to the parent because a de minimus
amount of the Company’s operating assets (including cash) are held by corporate
subsidiaries.  Partnership agreements (including limited liability company
agreements) of the Company’s operating subsidiaries accounted for restrictions
on the transfer of net assets in an amount less than 1% of total assets. The
partnership agreements of the Company’s operating subsidiaries permit the
Company to consolidate and “sweep” substantially all cash held by the operating
subsidiaries as part of the Company’s cash management accounts. The only
restriction on that cash imposed by the partnership agreements is the timing of
the payment of distributions to the minority holders of those entities. The
Company has unrestricted use of the cash swept to operate its business and
service its indebtedness.

    Note
16.  Segmented Information, page 79

              2.

              We
      note your response to comment nine from our letter dated December 15,
      2010.  It is unclear to us why your change in the way management
      analyzes the business impacted your reportable segments for the fiscal
      year ended December 31, 2009.  In this regard, we note that you
      continue to identify each operating subsidiary as an operating
      segment.  Explain to us in more detail the factors that changed
      your determination of whether your operating segments met the aggregation
      criteria discussed in ASC 280-10-50-11.  Please provide us with
      your analysis demonstrating that the aggregated segments had similar
      economic characteristic and how this analysis differed from the prior
      year.

    As
disclosed in the Company’s Form 10-K for 2008, the SCS segment was considered
the Company’s “other” segment and was not an aggregation of the operating
segments included in that reportable segment. The combination of the CRM and SCS
segments, which entailed moving one operating segment (Accent) to the SCS
segment and moving five others (Bruce Mau, Hello Design, Henderson Bas, YMM and
Veritas) out of the SCS segment, was done due to the Company’s continued
evaluation of the aggregation criteria and the expected operating results of
certain operating segments. Accordingly Accents gross margins, which prior to
2008 were greater than 25% decreased to 24.3% in 2008, remained flat in 2009 and
were expected to be below 24% in 2010, actual 2010 gross margins were 23.7%. The
margins going forward are expected to decline to approximately 23%. Based on
this analysis and on the aggregation criteria discussed in ASC 280-10-50-11
which was described in our prior letter and the expected similar economic
characteristics, gross margins between 20-25%, we deemed it appropriate to
combine Accent with other operating segments previously included in the SCS
reportable segment. This differed from the prior year in that at that time
margins were not expected to continue to decline but rather increase. During
2009 and in 2010 the Accent business was significantly impacted by cut backs
from its major client thus reducing the margins for the foreseeable future,
revenues decreased from $134.0 million in 2008 to $105.4 million in 2009 to
$78.9 million in 2010. The changes relating to the other operating segments
Bruce Mau, Hello Design, Henderson Bas, YMM and Veritas from the SCS segment to
the SMS segment was done because the current gross margins and expected gross
margins were in the 40-45% range. This change was not made in the prior year due
to the immateriality of these entities.  In the aggregate these
operating segments represented revenues in 2009 totaling $24.5 million or only
6.6% of the SMS revenues of $371.4 million. Operating income from these entities
for 2009 totaled $3.5 million or only 9.8% of SMS operating income of $35.9
million. Aggregated revenues for 2008 totaled $25.6 million or only 7.1% of the
SMS revenues of $363,580. Aggregated operating income from these entities for
2008 totaled $2.3 million or 8.2% of SMS operating income of $27.7
million.

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    Note
18.  Commitments, Contingencies, and Guarantees, page
85

              3.

              We
      note your response to comment 10 from our letter dated December 15, 2010,
      in which you state that you recorded an adjustment of $4.2 million in
      error.  Please describe for us in more detail the nature of this
      error and the impact that its correction would have on your financial
      statements.

    The
nature of the error was such that the $4.2 million was an amount that had been
previously recorded on the balance sheet as minority interest. Upon the adoption
of FAS 160, this amount was reclassified to Redeemable Non-controlling Interests
when the Company recorded the Put options. These minority interests related to
equity that had a Put option attached to it. Upon further review it was deemed
that the estimated redemption value of the Put options to be recorded should
have been reduced by this amount. Instead the total estimated redemption value
of $29.5 million was recorded with an offset to Additional Paid-In Capital.
Accordingly, the Company has corrected this error as of December, 31,
2010.  The correcting entry is to reduce Redeemable Non-controlling
Interests and increase Additional Paid-In Capital by the $4.2 million to correct
the overstated Redeemable Non-controlling Interests and the understated
Additional Paid-In Capital. This amount was a fixed amount and was never
adjusted during 2009.  The only adjustments made to Redeemable
Non-controlling Interests related to adjustments to the estimated redemption
value. This entry would thereby increase MDC Partners Inc. Shareholders’ Equity
by 4.6% and total equity by 4.4% and decrease Redeemable Non-controlling
Interests from $33.7 million to $29.5 million, which we have determined to be
immaterial to the Company’s 2009 consolidated financial statements.

    .

    *                           *                      *                      *                      *

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    The
Company hereby acknowledges the following:

              ·

              the
      Company is responsible for the adequacy and accuracy of the disclosure in
      the filings;

              ·

              Staff
      comments or changes to disclosure in response to Staff comments do not
      foreclose the Commission from taking any action with respect to the
      filings; and

              ·

              the
      Company may not assert Staff comments as a defense in any proceeding
      initiated by the Commission or any person under the federal securities
      laws of the United States.

    *                           *                      *                      *                      *

    Please
direct any questions concerning the above responses to the undersigned
(telephone: (646) 429-1805; fax: (212) 937-4365), with a copy to Ethan
Klingsberg (Cleary Gottlieb Steen & Hamilton LLP; fax: (212)
225-3999).

                Very
      truly yours,

              /s/ David
      Doft

                David
      Doft

                Chief
      Financial Officer

    Enclosures

              cc:

              Melissa
      Hauber

              Robert
      S. Littlepage, Jr.

      Securities and Exchange Commission

              Miles
      S. Nadal, Chairman and Chief Executive Officer

              Mitchell
      Gendel, General Counsel & Corporate Secretary

              Michael
      Sabatino, Chief Accounting Officer

              Members
      of the Audit Committee of Board of Directors of MDC Partners
      Inc.

              Al
      Ferarra, BDO Seidman LLP

              Ethan
      Klingsberg, Esq., Cleary Gottlieb Steen & Hamilton
  LLP

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