Ever been told your agency would be a hard sell? That it was too reliant on a few key employees or customers? That the lines between you and your business were too blurry?
We’ve heard it all before. And yet, with the right help, you can find someone to continue your legacy while maximizing the reward for your years of hard work.
Today we’re excited to announce the extension of our M&A advisory services to agencies. Together, we’ll help build a compelling case for acquisition, find a buyer who aligns with your culture and values, and ensure you get the valuation you deserve.
We’ve proven our acquisition playbook successful across thousands of SaaS exits. Now we’re turning our attention to the underserved agency market to help you get acquired.
Why Agencies Need M&A Guidance
Many of today’s biggest companies owe their success to agencies. From Slack to Alibaba, Google to Airbnb, agencies have helped some of the most recognizable names in tech build and grow without the high costs of building in-house teams. At Acquire.com, we’ve used at least three separate agencies to augment our teams during especially busy periods or complex projects. Agencies rock, no question.
Despite agencies playing a vital role in business, and the upside potential for an acquirer, they can be challenging businesses to sell. Talent and client relationships don’t always survive changing ownership. Service-heavy agencies can struggle to scale without a corresponding investment in talent. With customer concentration risks heavy on buyers’ minds, multiples have typically skewed lower than SaaS.
Without expert guidance, you may find it difficult to convince buyers you’ve zapped the risks and created the upside potential. You need someone well-versed in the agency business model, who knows how to position the opportunity. Someone who can vet buyers on expertise abd the character traits your clients expect, preventing friction. We’ve helped hundreds of agencies sell and can help yours, too.
Think of the intangible value wrapped up in your agency business. Your brand, reputation, relationships, talent – accolades you slogged day and night to achieve. But buyers may not see these assets in the same light, believing them subjective and subordinate to financial numbers. An M&A advisor’s nuanced understanding of valuation models and negotiation can help articulate the opportunity and true worth of your business, ensuring you don’t leave money on the table.
How We Prepare Your Agency for Acquisition
Our M&A team has been trained on hundreds of agency exits on Acquire.com. You’ll start with a free consultation with one of our agency specialists who’ll draw up your exit plan and guide you through every stage of your acquisition. Here’s an overview of the services you get from our world-class M&A team.
- Agency Scorecard
First, we evaluate you and your business as a buyer would. Beyond analyzing your financials, we’ll also identify weaknesses specific to your agency such as customer concentration, lack of automation, customer retention plans, and so on and develop a plan for mitigating them.
Think of your scorecard as surveying a building you want to buy – we’ll peek behind the curtains and tap the walls to fix issues before your business goes on the market. You only get one chance to make a great first impression, and we’ll ensure you make the most of it.
- Financial Recast
Robust and well-documented financials are important in every acquisition but even more so when selling an agency. You want buyers to understand the true earnings potential of your business, which means adjusting your P&L for incidental, discretionary, or personal expenses. Your M&A advisor will review your numbers and refer you to our finance team if we think a financial recast will improve your exit chances.
- Asking Price Strategy
Next we’ll evaluate your exit goals to understand the spectrum of potential offers you’d consider. Not cash expectations, but also negotiation tools like seller financing, earnouts, transition periods, and more. You’ll end with a range of prices and terms that meet your goals.
Given buyers are often skeptical of agencies, our biggest focus will be on maximizing attention to subsequently drive up your valuation. We might, for example, suggest you enter the market at a more competitive price point to attract more offers. It all depends on market conditions. But your M&A advisor will build the case for your valuation based on tangible and intangible assets.
- Go-to-Market Plan
Before listing your agency, we’ll gather everything you need to answer buyer queries and manage interest. That means creating a living Q&A to efficiently share information, a deal schedule to control the process, and a compelling listing and data room including all metrics and documents.
Knowing the questions buyers typically ask of agencies, we’ll help you prepare detailed client retention reports and new account growth to assuage concentration concerns. You might also highlight multi-year contracts and big-name clients to assert long-term revenue security.
Also, we’ll draw up an ideal buyer persona. Someone who not only has the skills and experience to grow your business and continue your legacy, but also embodies the personality and cultural values that your employees, customers, and business depend on. This will help vet buyers later.
- Confidential Information Memorandum (CIM)
Your CIM invites buyers to learn about your business and the acquisition opportunity. A multi-page sales document, the CIM provides in-depth business data, organized and structured into a narrative articulating its key selling points. All professional acquirers and intermediaries expect to see one.
You’ll consult with our in-house creative team to build your agency’s CIM, ensuring you don’t miss anything that buyers want to see. No need to draft anything – we write and design your CIM in a format that buyers expect. With this comprehensive document, you’ll spend less time answering the same questions again and again and more time negotiating a better deal.
- Buyer Ranking
We’ll help you field buyer inquiries as soon as your listing goes live. Buyers asking difficult questions? Ask your M&A advisor to jump on a call with you. Although we’re not parties to your transaction, we can act on your behalf on calls and in chat as well as introduce you to new buyers. No need to fret over tough conversations – nominate us to stand in your stead or be by your side.
As your shortlist shrinks, we’ll stack-rank buyers on ability, fit, probability of closing, offer, and more. This is the penultimate step before asking your favorite buyers for their final offers as per your deal schedule. Now’s also the time to consider what you can offer them in return.
- Final Negotiations
Buyers typically need reassuring of future earnings potential when acquiring an agency, often in the form of an earnout. As you consider final offers, your M&A advisor can help you negotiate achievable earnout targets that get you a sizeable closing payment in cash plus additional payments when your business meets realistic performance goals.
If you plan to stay on in the business, an earnout can be a powerful tool to bridge gaps in pricing and reassure buyers your agency is on the up. But if you’d rather an all-cash exit, your M&A advisor can help structure a deal with more cash upfront. In return, you might offer to stay on for longer. In most cases, the buyer will expect you to sign non-compete and non-solicitation clauses so they’re protected should you found a new agency or poach their talent.
- Escrow And Close
With a signed asset purchase agreement in hand, the acquisition of your agency is almost complete. All that remains is closing with escrow. You get the choice of two escrow providers on Acquire.com, Escrow.com for asking prices under $250k and SRS Acquiom for everything else. Both excel in managing the transfer of cash and assets, and best of all, we pay your escrow fee.
Make This the Era of the Agency Exit
You won’t find many M&A advisors, investment bankers, or marketplaces extolling the virtues of acquiring agencies. Does that mean they’re not exceptional acquisition opportunities? Absolutely not. For the right acquirer, an agency can grow into a profitable powerhouse with deep roots and even longer reach.
We’re excited to bring agencies into the fold of our M&A advisory. As pillars of entrepreneurial success, especially in startup and early growth phases of the business lifecycle, agency founders deserve as much recognition for their hard work as SaaS founders. We’re proud to now help that happen.
Thinking of selling your agency? Sign up for your seller account now for expert help from M&A advisors familiar with the agency business model, opportunities, and challenges.
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before entering into any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.