Acquisition considerations
Someone wants to invest in your agency. What to think about?
This is a question I get every month.
Someone wants to invest in the agency… to become the majority shareholder… What do I need to think about?
A majority acquisition like this has the potential to accelerate your growth, but it also comes with a host of considerations you need to think through. Very carefully.
Valuation and Deal Structure
Let’s talk valuation. Make sure that it truly reflects the full potential of your business, not just your current earnings, but your future growth, your brand value, your client base, and intellectual property. Don’t rely solely on their valuation - get a third party to assess whether the numbers stack up.
Then there’s the deal structure. How is this acquisition going to be paid? Is it all up front, or is it based on future performance? Watch out for earn-outs - they sound great in theory but can be difficult to achieve if the acquirer is holding the reins and setting the goals. Make sure you're not left in a vulnerable position.
2. Governance and Control
This is a majority acquisition, so governance and control are key.
Who’s really going to be calling the shots post-acquisition?
You’ll still own a significant portion, but, say, 60% is majority control.
What say will you have over the major decisions?
Are you still going to be able to run things the way you have before, or are they going to want to make significant changes?
Clarify who’s going to sit on the board, and how much say you’ll have when it comes to direction and strategy.
3. Cultural and Strategic Fit
The culture fit is crucial. This is where a lot of deals fall apart. You need to spend serious time getting to know their culture, how they work, how they lead, and how they make decisions. Does it fit with the way you’ve built your agency? Any mismatch, then you could be heading for real friction post-deal.
And then there’s the strategic vision. Do you both have the same view of where the agency should be going? Are you on the same page about what the next 3-5 years look like? If they want to take your agency in a direction you’re not comfortable with, you need to know that now.
4. Impact on People and Clients
Acquisitions create uncertainty, and you need to make sure your team is protected and motivated. What’s the plan for employee retention? Will your key people stay on? You might need to offer incentives or bonuses to keep them engaged during the transition.
Your clients will also need reassurance. They’re going to hear about this acquisition, and it’s best they hear it from you first. You need to be clear that this deal is going to strengthen your offering, not disrupt it. Communication is key here.
5. Synergies and Integration
One of the big drivers behind acquisitions is synergies (a real business school BS word!) - cost savings, operational efficiencies, tech integrations. Really?
You need to be crystal clear on what they expect from these so-called synergies. Are they going to introduce new processes or systems that will change how you operate day-to-day? Will they try to integrate you quickly, or do they want you to run semi-independently? This may well determine how well the transition goes.
6. Legal and Tax Implications
Get the right legal advice. I can’t stress this enough. Have your legal team go over every word of that agreement. Pay close attention to clauses around non-competes, lock-ins, and earn-outs. Understand exactly what you’re committing to.
Also, speak to your accountant about the tax implications. Depending on how the deal is structured, you could be facing significant tax liabilities. You want to ensure that the deal is set up in the most tax-efficient way possible, both for the business and for you personally.
7. Post-Deal Dynamics
Think about what happens after the deal. You’re going to have a new partner that holds the majority of the shares. How is that going to affect the day-to-day running of the agency? What are their expectations for performance and growth? Are there KPIs or OKRs that they’ll want you to hit? Make sure you understand what success looks like for them post-acquisition and that you're comfortable with those expectations.
8. Your Future Role
With a 60% acquisition, the question becomes - what do you want out of this? Are you still in it for the long haul, or are you thinking about an eventual exit? If you’re staying on, what does your role look like? Make sure it’s clear what your responsibilities will be post-deal, and that you’re happy with the new dynamic.
9. M&A Advisor
You need an M&A Advisor. Nearly everyone I know who has been acquired has said that the M&A Advisor was worth every penny… otherwise, you are like a lamb to the slaughter… you have no experience of acquisitions while the new Mother Ship has been here before, a number of times.
So… It’s not just about the numbers - this deal is about people, culture, control, and vision. Make sure that everything fits, not just for the next few months, but for the long term. And above all, take your time. Get the right advice and make sure that this deal is truly the right one for you and your agency.