In my new role, I have the opportunity to speak to a number of agency owners. Many of the themes are the same – I question, why is it so lonely at the top given there are so many people with the same challenges.
One of the main talking points is always purpose. In this instance, I don’t mean purpose with an emphasis on the ‘P’, I actually mean what is it all for? Why are we fighting every day to deliver a quality product, to attract and retain clients and talent and to preserve our profit line with an eye always on cash flow? I would estimate eight in ten leaders don’t have a clear and decisive answer to this question.
Are you a lifestyle business, or is your intention to realise value? Does leaving a legacy concern you? Is the time right for a new challenge?
Philosophical question number 1;
What am I doing this for?
Philosophical question number 2;
If I did want to realise value, what would that even look like?
Thankfully I am working with over forty buyers in the market and this is an excellent time to consider or prepare for a realisation event. Here are five reasons why selling your business now is worth consideration:
The market is currently buoyant. There are private equity buyers out there who have cash to spend and value creation on their minds. With so many different types of buyers on the market we may be seeing more variety than ever before which impacts deal volume as well as structure. The caveat being it’s unclear how long the good days will last especially with threats of war and economic recession upon us. De-risking could be the smart move.
Private equity is playing an important role in shaping the market for favourable deal structures. There are still traditional earn-out structures available from more established sellers, but they’re having to compete with investor funds who can create significant value from day one as well as the potential to generate even more money the next time around. Earn-outs or deferred consideration are starting to feel tired because they represent a market that has caused regret and resentment amongst many deals in the past
The market is being driven by digital, data, transformation, performance and tech. If you exist outside of that, there is an argument that consolidation makes sense. There are simply too many agencies and not enough margins to go around. In a post BREXIT, post COVID world, and with macro economic threats hanging over us, it is certainly a good time to consider becoming part of a collective, rather than individually taking on risk. If you exist within that, demand is high and supply is relatively low so the multiples are highly favourable at present.
Maybe It’s Time To Do Something Different
Sometimes, we stay in a job too long. That can apply to any person at any level in a business, even a CEO or Founder. Agencies require change, new energy, new ways of thinking and behaving. That can be hard if the business has legacy or inheritance issues. Doing something different can work for everyone involved, if we are just honest with ourselves and look for win-win situations.
The Power of the Collective vs the Lone Struggle
As a big believer in the power of the collective, my opinion is that it just hasn’t been done very well in the past led mostly by legacy groups. It starts with the deal – M&A are typically treated as financial transactions and this can lead to remorse on both ends. If culture and vision are aligned, collectives thrive. That is the key for unlocking successful partnerships and that’s where brokers need to focus their attention. Clear vision + aligned culture + structure + commercial performance = value for all parties. Collectives make sense if we can create win-win’s. Being alone can be too risky.