Yesterday we hosted a Q&A panel discussion on how best to prepare your agency for sale. I had the pleasure of moderating a panel of industry experts: John Farrell (John Farrell & Associates), Jackie Stevenson (The Brooklyn Brothers), Magnus Willis (Sparkler), Julie Langley (Results International) and Jo Evans (Partner, Lewis Silkin).
It was an insightful, enlightening and lively session. So, what were the key themes that came out?
Prepare your shareholders – get the right people holding the right shares (or options) in the right proportions well in advance of a sale. This should hopefully avoid tax headaches. Having an open dialogue with shareholders and the senior management team from the outset can do wonders in managing expectations and ensuring any deal is structured to keep most people happy and aligned on the chosen path.
Running a transaction process can be a full-time job in itself and very stressful. Organise your team and delegate parts of your day job so you can concentrate on the sale knowing the agency won’t suffer.
Prepare your agency – if you don’t have a good CFO who knows your business inside out, get one. The biggest reason why deals fall over is that the financials are messy or not documented correctly. Have a senior management team in place that will drive the business forward following a sale, and incentivise them accordingly. This is important for many buyers.
Whilst double-digit growth year-on-year, solid margins, strong forecasts and a good client mix are key, it’s important not to forget about the more humdrum matters such as getting client contracts signed, having IP assignments in place and getting your records in order.
Engage trusted advisers – engage advisers who understand the sector and the market, think creatively and who you trust to represent your agency as if they were a part of it. Your advisers will be part of your team throughout the whole sale process (which could be a very very long time!) so choose wisely. Also, it doesn’t hurt to get references.
Not all buyers are the same – the M&A landscape has transformed over the last few years. Gone are the days where the only buyers were one of the major networks. Today you have consultancies, private equity and other types of buyer getting in on the action.
Each buyer will have different reasons for making certain acquisitions. For example, certain consultancies may be looking to buy in a specific skillset or technology, rather than your clients, and to fully integrate your agency within the consultancy. This can impact on the consideration structure. Not only are consultancies generally paying more upfront and less on an earn-out, they are also changing the metric on which the earn-out is based (i.e. not necessarily linking the earn-out to profit).
When matching with buyers, think about your strategy, their strategy, compatibility and culture. Can the buyer help you take your agency where you want it to go?
Integration can be difficult – have integration conversations with the buyer early to fully get to grips with what’s expected from you and your agency following completion. Integration costs can be expensive and can consume a considerable amount of time.
For a link to our guide on selling your business, click here.
Of the 391 transactions completed in Q1 this year, 41% (162 deals) were in the marketing and advertising technology space (versus 34% in Q4 18).