A couple of weeks ago, Karish Andrews considered how the profile of agency buyers is rapidly changing – we are seeing more and more consultancies entering the market – and that it isn’t just the financial track record that they are looking for when making acquisitions.

So on 26 April, we hosted a panel of experts – Peter Harris (CFO, Next Fifteen Communications Group), Jim Houghton (Partner, Helion Partners), Chris Matthews (Principal, Sutherlands) and Paul Rajput (Partner, Head of Corporate, Lewis Silkin) – to discuss what you, as a buyer, should think about when you decide to make an acquisition and what the sellers look for in a buyer.

The key themes echoed by the members of the panel were:

• Have a strategy - your overall acquisition / growth strategy should drive the structure of the deal, not the other way around.
• Plan ahead - well beyond the completion of the deal.
• Price is not everything - it is a crowded market, so what can you offer to the sellers that other buyers can’t.

Strategy

1. Consistency is important:

• It is a reflection of your overall strategy.
• It is a demonstration of your management style.
• Your corporate reputation in the market precedes you.
• But be careful not to give an impression of a conveyor belt deal machine - you need to be alert to the sellers’ emotional experience of selling their business.
• Also think about how, as a buyer, you can improve the target’s business - not to have a plan for the future is not an attractive proposition for the sellers.

2. Cultural fit is extremely important for both the target and the buyer - it’s all about the right people doing the right thing for your business:

• Can you, as a buyer, see the companies working together?
• Will you have the buy in from your staff? Will the target have buy in from its staff?
• Is the chemistry good?
• Then think about the money.

Valuation

There is no standard model as such, so what is your reason for doing the deal?

• To add a new dimension to your business?
• To boost your resources?
• Think about the business proposition of the target - look beyond the hype of the deal - is the target well geared for the future?

Revenue, profit and margin are still crucial but increasingly buyers are looking at non-financial factors such as filling a talent gap.

Post-deal / integration

Doing a transaction is an exhausting process, particularly for the sellers, so give them time to settle in.

Integration does not work for everyone but if as a buyer you are considering it - think and plan ahead.

In an earn-out scenario, there is no real integration by design during the earn-out period, but what happens after the earn-out should be thought about early on.

Think about the next generation of managers at the target business - are they appropriately incentivised to continue growing the business for you?

Transparency between the parties is key – discuss the implementation strategy with the target early on. Due diligence before the deal is a good opportunity to understand the DNA of the target and understand how the parties can work better after the deal.

Role of the advisers

The choice of advisors is important:

• Your advisors (and indeed your internal deal team) can add a lot of credibility to you as a buyer if chosen well.
• Ensure they do not portray a different message to you.
• Don’t get caught up in the hype of the deal and listen to their messages of concern.
• Be transparent with them about your risk appetite.
• Ensure that due diligence is done by the right people - a lot of goodwill can be lost if due diligence is done by the people who don’t really know your and/or the target’s business.

Our next seminar in the Advertising & Marketing series is taking place on 27 June. Click here to find out more and sign up.