Most agencies strive for profitable growth, but unless they understand what marcoms agency buyers are looking for, they risk failing to realise the full value of their business at an eventual exit. Our new survey revealed a disparity between what agencies think buyers prioritise and what acquirers actually want in marcoms mergers and acquisitions.
It may be stating the obvious to say that potential acquirers or strategic growth partners will be most attracted to agencies with a track record of profitable growth (listen to our webinar on growth and building value before a sale with SI Partners' co-founder, Charles Fallon for more information on profitable growth). But businesses seeking to attract the most desirable buyers and to realise maximum business value when they do sell, must also fulfil other important criteria.
Our new survey reveals that many agency owners actually are not fully aware of what acquirers look for and misplace the relative weighting of acquirer priorities. This misalignment of perceived and actual acquirer priorities suggests many agency leaders may not be on the right path to building the most value in their agencies.
A stark mismatch in buyer/seller priorities
The SI Partners’ Path to Growth Survey– capturing the thoughts, aspirations and plans of 600 agencies in every major national and regional market – has revealed a surprisingly wide gap between what agencies think buyers prioritise in a sale and what acquirers actually want.
When asked what top three attributes they thought buyers were most interested in when considering an acquisition, agencies most commonly listed fame (or agency reputation), profitability and growth.
While agency decision makers were right about the importance of growth, more than half (55%) are failing to achieve the levels acquirers look for - typically growth rates of 15% or more. Moreover, agencies’ perception that buyers’ value fame and reputation above a contemporary offer, a committed leadership team and a diverse client spread, is not an accurate reflection of the criteria today’s acquirer landscape use to evaluate the attractiveness of creative businesses.
Failing to address this disconnect could prove to be a problem for many when they come to sell their agency or find a strategic growth partner, and could adversely affect potential valuations.
Different buyers also have different strategic needs. Deal rationale for acquisitive consultancies, for example, is typically driven by a talent gap and therefore they value quality of talent in their acquisition targets, while traditional marcoms buyers value agencies that have product or service offerings that they do not have.
The Buyer/Seller Disconnect Special Report is part of a series of insight reports from our latest research, The SI Partners Path To Growth Survey, which explores global agencies’ growth plans and challenges.
For the full report, download the SI Partners Path To Growth Survey