In the final part of Phil Jones' series on acquisitions, the digital veteran and DADI Awards chairman shares his own experience of selling his business and impresses the need to surround yourself with the right people if you are thinking of selling your agency.
Going back to the very personal experience of selling my business, it was a typography studio in the days before the Apple Mac and when every agency and design group in the country used to outsource all their typesetting and artwork to companies like mine. My baby was called APT and in the early eighties we invested serious money in having the best typebooks in the country (remember when typebooks had real kudos?) and then gave them away free to every art college in the country thus creating thousands of potential future clients amongst the students. I organised the APT 5-a-side football league for Ad Agencies, Design Agencies and Art Colleges which helped build our profile in the industry and make us lots of friends in the creative community and our APT xmas parties were legendary. We even made our own LP in the studios of Nicky Horne at Capital Radio as a party invitation.
By the mid 80s we were being approached by several larger businesses wishing to buy us and by that time we had over 60 staff and were flying, our houses were still security for the business and we sat down one day and thought 'why not'? Our three year earn-out ended in 1989 by which time we had over 90 staff working over three shifts and myself and my two partners Ken & Derek received the maximum earn-out under the generous terms on offer. During our earn-out period the apple mac started to make serious inroads inside our client base and by the early nineties every agency who used to outsource its work to professional typesetters had taken most of it in-house. I still look back at the extraordinary risks we took in building our business and investing in its reputation and had we not made the decision to sell at precisely the right time we would no doubt have lost everything because of outside forces beyond our control or even in our wildest imagination.
Selling my business meant I was given the opportunity to get rid of my personal guarantees, pay off my mortgage, buy a plot of land in Portugal, take the wonderful Mrs Jones on Concord and start all over again in the digital era in the nineties. A massive PHEW was let out when the three year earn-out was up and I would love to be able to say it was all down to perfect planning on our part. Like most things it came down to being decisive and a little luck and my advice to some of the agencies who are currently contemplating or entering negotiations is to make sure you surround yourself with people who know what they are doing and who don’t have a vested interest. One of the leading players in this area is Green Square and I asked Tony Walford and Andrew Moss for a few tips to watch out for.
“Having advised over 50 clients the same challenges appear time and again. In terms of creating value three recurring themes rise to the top. They are not surprising, but difficult to create, develop and maintain. Simply listed they are :
• Growth – have a clear and articulated proposition and plan to how your business will grow
• Team - hire and develop high quality, flexible, committed staff
• Profitability – underpin the teams quality and growth with good levels of consistent profitability.
"Management are often and necessarily focused on the day to day demands of the business and their clients, particularly during growth or difficult times. The sale of the business and long term planning are often low on the agenda. However, when considering a sale this is a vital component in maximising value and needs addressing a year or two prior to sale. Having an unbiased and non-competing external sounding board can be helpful in these situations. This may come in the form of a chat with your traditional trusted advisors, an experienced Non-executive Director or an expert consultant and corporate finance advisor like Green Square. Whichever you choose as your external reference point and challenge ensure it is from someone you respect (even if you disagree) as it will be vital in helping you take your business forward.
"From Green Square’s perspective we typically help clients around 12 to 24 months before exit by performing a Commercial Review that identifies the core strengths of the business with reference to current value drivers; identifies any issues that may reduce the value during a sale process and maps out the journey to market. Taking pride in having the best testimonials in the marcoms sector we ensure our clients are fully supported in that journey from start to finish.
"The last bit of advice in maximising your value is to choose your sale advisors carefully. All are likely to be experienced but few are experts. You only get one-chance at selling your business so you need to make sure it’s done at the right time with the right people supporting you. Like any reputable business the value is in the ‘People, not the process – choose the experts.’"
In summary I think it’s really healthy when larger groups are looking to buy and integrate agencies with specialized talents and its gives a potentially lucrative way out to those who are ready to make that step. The difference between making a real success of it and it just fizzling along is very often down to the attitude which both parties go into the deal and the genuine respect they have for each other. Timing is crucial because that brings with it energy, creates a momentum and a desire to succeed, where it can fall to pieces is where larger groups acquire several agencies and then put them together hoping it will become more than the sum of its parts or where they become more critical of the individuals that make up a great business when they have time to analyse everyone’s individual strengths. If Lionel Messi or Ryan Giggs were judged on how good he was with his right foot he wouldn’t be the best player in the world, very often it’s the intricate balance of talents and personalities that make a business successful and it can be quite fragile if handled badly by the acquiring company.
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