Preparing an agency for sale is a multifaceted process that requires meticulous planning and execution. The goal is to maximise the valuation of your agency and ensure a smooth integration to the new group.
M&A
Preparing an agency for sale is a multifaceted process that requires meticulous planning and execution. The goal is to maximise the valuation of your agency and ensure a smooth integration to the new group.
With the 2024 Olympics around the corner, we looked at some lessons from the global showcase to help you get your agency into the best possible shape for a successful sale.
Financial Fitness - The Back Bone Of Success
While different sports have different costs, it certainly isn’t cheap being an Olympian. According to Forbes, Olympians like archers can spend over $25 000 a year preparing for the Games – it highlights the importance of budgeting and financial planning – something that’s even more crucial when it comes to a successful agency sale.
Prospective buyers will scrutinise your financial health and any discrepancies can significantly reduce your agency's valuation or even derail the sale. Here’s how to prepare:
Accurate forecasting: Develop a realistic and comprehensive three-year forecast. This includes revenue projections, expense estimations, and cash flow predictions. An accurate forecast demonstrates stability and growth potential, that are attractive to buyers.
Financial director (FD): Employing a strong Financial Director is invaluable. An experienced FD can ensure that your financial statements are accurate, your forecasts are realistic, and your financial strategy aligns with your business goals. Their expertise can be crucial in discussions with potential buyers.
Margin and ratios: Maintain a keen focus on your profit margins and key financial ratios. Metrics such as EBITDA (earnings before interest, taxes, depreciation, and amortisation), operating margin, and liquidity ratios provide a snapshot of your agency’s financial health.
The power of transparency: A big part of the success of the 2020 Tokyo Games was a push to make scoring and judging for the events as clear and open as possible. It made it much easier for even casual spectators to follow the action. Just as transparency was key to the success of the Tokyo Games, full disclosure during due diligence builds trust and prevents surprises.
Flag issues early: Identify and disclose any potential issues upfront. This includes outstanding debts, pending litigation, or contractual obligations. Proactively addressing these issues prevents surprises later in the process.
Build Trust: Transparency builds trust with potential buyers. It shows that you have nothing to hide and are committed to a fair transaction.
Prioritise paperwork: It’s not just in training and during their events that athletes need to be organised. The Olympics requires all athletes to have up to date paperwork and contracts to be able to compete. During a sale, having staff and client contracts in order can make all the difference.
Client contracts: Ensure all client contracts are current and reflect the terms of your engagements. Long-term contracts with key clients can enhance your agency's valuation.
Retention strategies: Develop strategies to retain clients during and after the transition. Buyers will be keen to see a loyal client base that will remain post-sale.
Staff contracts: Make sure all staff contracts are up-to-date and legally compliant. This includes job descriptions, compensation details, and any non-compete clauses. Start thinking about succession management. Identify key personnel and plan for their retention. Offering incentives or equity stakes can help retain critical staff members through the transition.
Always Be Improving & Growing
As an event, the Olympics continues to grow. The first modern Olympics in 1896 had 241 athletes from 14 countries competing in 43 events. In contrast, this year’s Paris event will feature around 10,500 athletes from 206 countries competing in 329 events across 32 sports. A growing business is always more attractive to buyers and continuously driving new business is essential even while preparing for a sale.
Business Development: Maintain a strong focus on business development activities. Showcasing a pipeline of potential clients demonstrates growth potential.
Marketing Efforts: Keep your marketing efforts robust. An active marketing strategy that generates leads and brand awareness signals a healthy, proactive business.
While navigating a successful sale can seem like a complex process, taking a few notes from an Olympian’s playbook can help you maximise your agency’s valuation and give you the best result possible. For more valuable tips, make sure not to miss our second "Lessons from Olympians" article or, even better, contact us for insights specific to your particular business.
