It’s tough to part with your baby. But when it comes to PR firm owners selling out, the analogy is apt. Owners put their blood, sweat and tears into launching and growing their agencies and, in many cases, consider their firms an extension of themselves (after all, their names often are on the shingle). That’s why PR firm owners have to be metaphysically certain that they are ready to sell before starting the M&A process. The process has lots of moving parts, and owners risk incurring a great deal of waste if they start to go down the road of a sale and wake up one day and decide willy-nilly to change their minds. Rick Gould, CPA, J.D., managing partner of Gould+Partners, provides some sagely advice for PR firm owners regarding what they need to take into account before committing to a sale, both professionally and personally.
What should be the major business reasons that PR firm owners to decide to sell out?
Gould: There are several reasons. One is that firms are losing pitches and can’t compete on the RFP front with agencies with more varied services. A major impetus to sell is that firms lack depth and don’t own the capabilities that clients increasingly demand, particularly digital PR, online analytics and data management. Another reason to sell is that owners need a capital infusion; a buyer can come in and provide the funding necessary to either build or buy the services to the selling from needs to grow. They’ll get you the talent, they’ll get you the technology needed to compete. Another important consideration is that a new buyer will relieve PR firms of the back office. For PR firm owners and C-suite executives of boutique and smaller firms, the back office is a serious time-suck and the new owner(s) will already have a system in place to take that off the hands of the owner. The last reason is that once they sell—and for at least the next few years before they cash in—buyers get back to doing what they love: PR, interfacing with clients and creating campaigns with successful returns.
What are some of the personal reasons that PR firm owners decide to sell out?
Gould: The ability to monetize your asset is the primary reason. PR firm owners for years have built up the value of their organization and worked very long hours and may feel the time is right to finally cash out. Financial is another factor. Owners may have college-age kids and are about to face education bills. Monetizing your firm may help you finance that. Owners may also want to make other investments from the proceeds of a sale. Another reason is burn-out; a lot of owners eventually want to get out of the business and start something new, such as teaching or consulting. The ‘Age Factor’ is another significant reason. I think 55 is the magic age to sell; you shouldn’t really go way beyond that age because once the sale is complete you’re going to have to stay with the firm another four of five years to receive your earn-out.
Rick Gould is author of “Doing It The Right Way: 13 Crucial Steps For A Successful PR Agency Merger or Acquisition,” and “The Ultimate PR Agency Financial Management Handbook: How To Manage By The Numbers For Breakthrough Profitability Of 20% Or Greater” (4th Edition)