A few weeks ago I had the opportunity to speak to Dan Englander at Sales Schema about what I look for when reviewing an agency for acquisition.
Dan is extremely knowledgeable about the agency business. He’s one of the top thinkers and operators in outsourced business development for agencies. We had a wide-ranging discussion about the importance of having a business development strategy (growth plan) when you’re thinking about selling your firm. You can listen to the full interview on Dan’s Digital Agency Growth Podcast here.
This was a one-hour podcast interview. So, I will summarize the substance of the discussion here:
Dan asked me about specific attributes Millwright looks for in acquisition candidates. The short answer is, we look for industry depth and specialization, and owners who have a definite plan for growth.
We talked about the red flags that I look for when talking to owners about their new business strategy. It’s a deal killer.
The importance of having your senior team driving the new business process by the time you’re ready to sell.
I summarize my not-too controversial views about industry specialization, and how to manage, review and resolve so-called conflicts.
We talked a lot about the issues I’ve seen come up after the acquisition as it relates to new business. Specifically, we discussed the clash of cultures that can often occur when big agency/hold co. swallows an entrepreneurial founder and her/his team. Basically, sparks will fly and tears will fall.
I make a nearly a full-throated defense of the earn out as an instrument of valuation and post-acquisition performance evaluation in agency M&A. The earn out, though often maligned, is the best/least worst tool for the job.
We lightly touch on ways owners can best facilitate the transition to their senior team after the sale. We barely scratch the surface on this topic. It could easily be its own multi-hour-long discussion.
We wrap-up on why the move from AOR to project-based relationships will largely benefit independent agencies versus the bigs. And finally we talk about the future of work, geographic agnosticism, and using freelance talent to build and scale agency teams.
This was an important conversation and I’m grateful to Dan for asking me to have it with him.