Any other activity that I pursue for the first time would typically be shared with an enormous community of friends on Twitter, Facebook and other avenues, and advice could be offered, tips learned, and I'd approach the process in a better position.
But acquisition is different.
You can't exactly tweet that you're "meeting with Agency X, and they're talking about buying us." I was also surprised at how little information was available specific to our situation. There are blogs devoted to people who like to collect mushrooms in remote villages, but agency acquisitions? Not so much. I promised myself that if we completed the deal, I'd do my best to share what I learned about the process. What follows is the first of a series of posts devoted to sharing our experience of the Source Marketing/Humongo Agency acquisition.
Is acquisition right for you?
Our agency was approached every two years on average, and invited down the road to acquisition. In all previous situations, we were flattered, but politely declined. What was different this time? Three things:
1. The time was right. We never needed a "big brother" at any other time in our agency's history. At the same time, I wasn't looking to cash out and move to Florida, either. But 2009 was a challenging year for our agency -- not because of the recession, but because of opportunity. The buzz around our brand had built to a perfect storm of new business, yet our staff could barely keep up with existing business. At the same time, the recession slowed our receivables, putting us in a tight cash situation. We needed to hire people to take advantage of the opportunity on our desks, yet we didn't have the financial resources to do so safely. Instead, we focused on existing business, delivering the best product possible to current clients, and then failed to follow through on countless new business opportunities. A cash infusion would change all of this for 2010.
2. The suitors were perfect. We've met with several other potential suitors over the years, but they never "felt right." Either their culture was too disparate from ours, or their goals were not aligned with where we wanted to be. This time, it was different. We were fortunate to have multiple agencies and holding companies at the table, which put us in the enviable position of comparing deals and situations and choosing what was best for our business. Ultimately, we had two deals for consideration, and both were great situations for different reasons. In the end, our decision was based entirely on culture and business goals -- the same thing that's driven nearly every decision at our agency over the last decade in business.
3. Ownership wasn't important to me. Considering an acquisition forced me to look deeply at why I do what I do, and what motivates me. In the process I discovered that while I started my agency because I had always wanted to own my own business, the reason I show up at the office today is very different. I own the agency because it affords me the opportunity to do what I've always wanted to do. A decade ago, I could not have walked into another shop and become the leader. I created this opportunity for myself because it did not exist elsewhere. Now that I've built that experience, ownership isn't important. Instead, I value continued learning, new experiences, bigger projects, financial rewards and FUN. None of those things require ownership.
Hire people smarter than you.
You know this, and your agency is likely filled with brilliant minds. Navigating your way through a possible acquisition is no different. Once I knew that I was open to the idea, I knew that I didn't have the knowledge or experience to navigate this process to a successful close. So I sought help. We hired an independent consultant to help us through the process. He taught us about deal structure, possible scenarios and walked us through the entire deal step by step, day by day, right up until the close.
Consultants can be hired in a myriad of ways. We chose to work on a flat project fee basis, so we knew exactly what our exposure would be, regardless of how the deal worked out. We also negotiated a discounted fee should the deal blow up or we decided to walk away. In this way, our consultant had the incentive to get us to a close, but at the same time if we got nervous and wanted to walk from the deal, we'd limit our expenses. There's no right or wrong way to structure this relationship, so my advice is to trust your gut and go with what you believe is best for your situation.
So, now we were ready. We had suitors interested in our firm. We had a consultant to assist in the creation of the best deal ever. And as an owner, I was ready to commit. Now I just had to tell my employees...
|ABOUT THE AUTHOR|
Darryl Ohrt is a former punk rocker and chief contributor to the greatest blog in all of the land, BrandFlakesForBreakfast. While his official title is president, his business card says he's "Prime Minister of Awesome" at Humongo (formerly known as Plaid). Darryl knows just enough to be dangerous. He's on the internet right now, playing, investigating and exploring. Watch out.