How To Calculate <em>Mad Men</em>'s Company Worth vs. Modern Day Silicon Valley Liquidity

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Answer by Yishan Wong


If you pay enough attention to little details from various episodes, you can figure out the cap table for Sterling Cooper Draper Pryce.

You can then also work out how much money each of the principals would have made in their would-be IPO, adjust according to inflation, and get a rough comparison to how much that would mean in a modern-day Silicon Valley liquidity event.

Let’s begin:

(Forgive me, I don’t remember which episodes each of these clues was cited in; I just remember collecting them gradually as I watched — if someone has citations, please edit-suggest or comment — also, this contains some spoilers)

Upon formation, Sterling Cooper Draper Pryce has four senior partners and one junior partner. Eponymously, they are Roger Sterling, Bert Cooper, Don Draper, and Lane Pryce. The junior partner is Pete Campbell. They are not known to have taken any investment capital other than capital put in by the founding partners themselves.

In one of the episodes, reference is made to the profit-sharing dividends, wherein each of the senior partners receives one share, and the junior partner receives one-half of a share. Assuming these dividends are distributed proportional to ownership, the cap table at founding looks like:

Sterling, Cooper, Draper, Pryce each at ~22.2%, and Campbell at ~11.1%.

Later, Joan Harris negotiates a 5% stake in the company for her contributions. There is no indication that this stake comes disproportionately from any one partner’s share, so we assume the existing stakeholders are diluted equally. Thus, post-Joan, the cap table looks like:

Sterling, Cooper, Draper, Pryce each at ~21.1%, Campbell at ~10.6%, and Joan at 5%.

This is the cap table at the time of the attempted IPO.

In the IPO episode, Pete remarks to Joan that the agreed-upon offering price will value the company at “over 20 million dollars.” We can then proceed to trivially calculate how much each partner is worth, assuming the stock price holds after the first-day pop, etc.

  • Sterling, Cooper, Draper, (and the now-deceased) Pryce are each worth ~4.22 million.
  • Pete Campbell is worth ~2.12 million.
  • Joan Harris is worth1 million.

The Bureau of Labor Statistics gives us the inflation ratio from 1968 to 2013 as 6.69x. That is, $1 million in 1968 is worth about $6.69m in 2013.

Subsequently, in 2013-equivalent dollars, we have:

  • Sterling, Cooper, Draper, and the estate of Pryce are each worth28.2 million.
  • Pete Campbell is worth14.2 million.
  • Joan Harris is worth6.69 million.

A few things of note:

  • In 1968, the top marginal tax rate was 75.25% for annual earnings above200k. If the partners liquidated their shares in a prudently tax-advantaged manner, they would avoid paying this top marginal rate (keep in mind that a fairly rich salary in 1968 was30k/year – adjusted for inflation, this is200k/year in 2013 – Don Draper’s salary as mentioned in the episode where he was re-negotiating this contract). Thus, the tax rate most relevant here is the probably the top marginal rate on long-term capital gains in 1968, which was 26.9%. Higher than today’s, but still much lower than 75.25%.
  • By the (somewhat satirized) standards of Silicon Valley[1], an exit in the low-mid double-digit millions would put Sterling, Cooper, Draper, and Pryce’s widow in “the area’s middle class, financially independent but still striving to keep pace.” In 1968 NYC’s financial sector was nothing like the insane place it’s become in the last decade (deca-millionaires feeling poor next to billionaires), so where they were living this payout would have definitely been pretty rich.
  • Joan’s payout is definitely enough to “sustain a single mother and son for a lifetime” (Lane Pryce’s original words), assuming she liquidates her share in the most tax-advantaged manner and invests it wisely in income-bearing securities.
  • Pete Campbell’s inner demons: likely not sated.

Of course, the IPO doesn’t happen and instead SCDP merges with Ted Chaough’s firm Cutler Gleason and Chaough. Frank Gleason is revealed to have pancreatic cancer in the same episode as the merger, so it’s not clear whether he is part of the merger, so assuming that the only partners who join the combined entity are Ted Chaough and Jim Cutler, we assume that the merger treats them both as new senior partners in the combined entity, resulting in the following final cap table at the end of Season Six:

  • Sterling, Cooper, Draper, [the estate of] Pryce, Chaough, Cutler each at ~14.8%.
  • Peter Campbell at ~7.5%
  • Joan Harris at ~3.5%

Note: Don Draper is actually fired at the end of the season 6, and there are two possibilities for the disposition of his equity: First — the possibility that I consider more likely — is that he owns the equity outright and so retains it after his termination and there is no change in the cap table. Second, it is possible that his equity was subject to a right-of-repurchase by the company and the other partners may have chosen to exercise it. This would seem unusually adversarial and, depending on the specific terms, may either have lapsed by this point or have a significant negative effect on the cash flow of the company so it is probably unlikely.

[1] If You Can Make It in Silicon Valley, You Can Make It . . . in Silicon Valley Again

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