Small Agency Conference and Awards

Tips for Agencies Thinking of Selling

Don't Always Take the Highest Offer, and Don't Make Big Changes in Year One

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Interpublic's Irene Whyte and Results International's Maurice Watkins discuss small-agency M&A at the Ad Age Small Agency Conference.
Interpublic's Irene Whyte and Results International's Maurice Watkins discuss small-agency M&A at the Ad Age Small Agency Conference.

There are unusually high levels of mergers and acquisitions in the agency world right now, but that doesn't mean small shops can just breeze into the right kind of sale, panelists said at the Ad Age Small Agency Conference on Thursday in Boston.

Potential buyers aren't the problem. "New buyers coupled with new capabilities and demand is driving a lot of new activity in the market and I really don't see it stopping any time soon," said Maurice Watkins, partner at Results International, an investment bank focused on agencies and marketing tech companies. The big agency holding companies are only doing about 15% of the global deals right now, he said, with IT companies, international buyers, media companies and private equity driving many of the other deals.

The questions are which agencies are wanted, ready to sell and prepared to navigate the process. Size does matter, even within the "small agency" crowd, Mr. Watkins said. "It's very difficult to in any market to find a buyer for the 10-person agency," he said. Fifty people, however, draws a certain kind of buyer. If you get to 100 people, that's a different kind.

"It is a buyer market on a smaller scale because they have to make a sort of strategic case for where you fit," he added. "Once you get to a certain size it's a seller market."

Smaller agencies do have an advantage, though, according to Peter Clark, CEO of The CHR Group, which owns marketing services companies. The larger you get the harder it is to make money, he said. "Small firms can make incredible margins."

If buyers are circling, there are some keys to not screwing it up:

Don't do it alone: Get advisors that understand the financial world, tax law and other intricacies that agencies do not specialize in, said Irene Whyte, executive director, M&A and corporate development and Interpublic Group of Cos.

Entertain more than one suitor: Do cast a wide net, said Mr. Watkins, instead of going the distance with just one possible buyer.

But don't take the highest number you hear: Take the best offer from the best partner, said Ms. Whyte.

Share the bounty: Make sure the whole team has skin in the game and can share in the upside, Ms. Whyte said.

"Don't put it all in your pocket," Mr. Clark agreed.

Move slowly: "Once you do sell don't make any significant changes in the first year," said Sharon Napier, CEO of Partners & Napier, which she sold to Project Worldwide in 2011. "Watch how your senior team settles in. I didn't do that and then I had a couple people leave after I had made a couple pretty significant promotions."

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