By Rick Gould, Managing Partner, Gould+Partners
You have butterflies in your stomach. You hope everything goes well and can lead to a long-term relationship. You probably have some questions, but you’re confident that by getting to know the person for the next several weeks or months those questions will be answered to your satisfaction. If things turn out really wonderfully you can ask for a commitment. A description of dating? It could be. But it also describes the typical dance between buyers and sellers of PR firms.
When (potential) buyers and sellers initially meet it often seems like a first date. Both sides may be a little hesitant, and want to make sure there’s good chemistry. They also want to make sure there’s room to grow. Most important, each side wants the partnership to provide a strong sense of security. At the same time, each side has certain needs in order to justify moving forward. With that in mind, Rick Gould, CPA, J.D., managing partner of Gould+Partners, provides some advice for PR firm owners and C-level executives on what buyers (and sellers) are looking for when it comes to joining forces and/or making a possible transaction.
What are potential buyers of PR firms looking for in the assets they may want to acquire?
Gould: At the top of the list is profitability and ROI, in that the buyer is confident that the firm he or she is buying—whether it’s a strategic acquisition or purchase from a private-equity player—will provide value and a healthy return on the investment. With that as the buyer’s baseline, there are several other areas that need to be addressed. These areas include whether the firm is an established PR agency and what is its reputation in local, regional and national markets? Buyers are also going to want to know about the staff and key executives and whether they’re open to being acquired by another agency. Clients will also be under review, and what are the net revenues by clients for the past three years as well as projected revenues for the upcoming year. Buyers will also consider positives/negatives of the firm, such as the age of the owners/principals (which, ideally, shouldn’t be above 55), the organizational/digital gaps at the firm and the sophistication of the business/strategic plan.
What are sellers of PR firms looking for from potential buyers?
Gould: Establishing a comfort zone is key for sellers. Both the buyer and seller needs to make sure their reasons for the sale are aligned. From the seller’s standpoint, it’s good to put this in writing, in a term sheet prepared by the buyer. There are several questions that need to be answered: Will the firm retain its name? How will can the combined firm be leveraged and marketed? Are there rainmakers and/or entrepreneurs whose talents could be maximized in the combined firm? One of the most crucial questions for a seller to ask is, under new ownership will the PR firm be able to cross-refer services to present and future clients? Buyer and sellers should also create a joint vision statement and decide how to measure success, E.g. financial returns, employee retention and satisfaction, client growth and profitability. The least intimidating strategy is to have these measurement processes in place well before a sale.
Rick Gould, CPA, J.D., managing partner of Gould+Partners, is the author of “The Ultimate PR Agency Financial Management Handbook: How to Manage By The Numbers for Breakthrough Profitability of 20% or Greater,” and “Doing It The Right Way: 13 Crucial Steps For A Successful PR Agency Merger Or Acquisition.”