On a mission for acquisition

If there is one question that agency heads consistently ask me the most, it has to be this: ‘When should I acquire another agency?’

You may not be surprised to hear that it is an enquiry I never tire of hearing of. Because to me it’s the perfect way to open up all the must-have conversations that entering into an acquisition needs – considerations that can sometimes be overlooked.

So where should we begin?  

It is clear to me that during any assessment of another agency, the all-important ‘why should I buy?’ element must be addressed first.  Acquiring another agency must have an obvious reason, and it must fit into your growth plans – be it to achieve geographical expansion; to fix any productivity problems; to improve KPIs; or to get instant talent and capability rather than slowly growing it from scratch.  

The point, however, is that there is seldom one single reason. Buying an agency could be imminently sensible if you are too reliant on freelancers or have particular or deep-seated recruitment issues. It might also be that you want another agency’s oven-ready client list, or because buying a particular new business could act as the launch pad into other areas or services you want to offer.  

Perhaps you want to accelerate the speed with which you want to sell and exit from your own organisation. Acquiring another agency might be on the cards because doing so could enhance the profitability of your own business and your attractiveness to potential buyers. It might also reduce the old-age problem of ‘founder reliance’ – by having a larger, and more capable team that can take on more diverse tasks.

What I hope can be understood is that the reasons for acquiring a new agency are both multifaceted and extremely complex. Whether it is to achieve better operational efficiencies, accelerated growth, or just to get more resources, it is a big decision that requires taking advice over.  

Just for added complication, it may well be – for example – that ‘buying’ (in the traditional sense), is not always the best option at all. A partnership might work better, or some other sort of joint venture or merger.

What I am trying to say is the pluses and minuses all need careful consideration.  

There is also no point buying another agency if you cannot establish a solid commercial basis (sometimes I suggest parties try working together first to test this for themselves).  

And if there is one thing I know from experience, it is that the positives above can have a very alluring appeal. Which is even more reason to stay grounded and to take external advice from someone who has done it before and knows what to look out for. Deal structuring can make the difference between a successful acquisition and years of pain.  

Just like a marriage, you need to try and weigh up whether you can see yourselves having a joint and fulfilling future. A poor choice of partner can be disastrous. Make the right choice though, and you could have an acquisition that is a match made in heaven.

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