Agency Growth by Acquisition

Acquiring other businesses is a tool that agency owners frequently use when growing their own business. The operative word is growing. The purpose of growing your business through acquisition is to increase the value of your existing business. This is a critical part of maximizing the value that you will gain when you eventually exit your business

We talk to agency owners a lot about the first three steps of the exit planning process. These are:

1. Set Exit Objectives. 

2. Determine the Value of your Business. 

3. Increase the Value of the Business. 

Acquiring other agencies and synergistic businesses is a possible way to achieve step three. 

A primary exit objective held by almost all agency owners is to leave the business when they want. And, to do so with sufficient cash and financial independence for the rest of their lives. In fact, when they leave is usually determined by the point at which they can leave with assured financial security. For most owners, meeting retirement objectives is a function of having sufficient value within the business to permit their departures. 

For owners who experience a disparity between when they want to leave versus when they are able to leave, you could look to grow value by acquiring a next generation leader and potential buyer before you become a seller. Although paradoxical on its face, the end result of becoming a buyer now may allow you to become a seller sooner rather than later. 

The Benefits of Growing Your Agency Through Acquisition

 The growth in popularity of this technique can be attributed to a number of factors: the relatively low cost of financing, the slow and uncertain path of organic growth, aggressive industry consolidators pursuing market share, and the large number of baby-boomer owners eager to sell and pursue other activities. 

The benefits that many owners have realized include:

• Reducing competition
• Increasing market share
• Attaining economies of scale
• Broadening complementary service offering
• Expanding geographically
• Establishing strategic alliances
• Achieving greater leverage with vendors
• Adding offering broader diversity
• Increasing their digital and social media vision, platforms and capabilities

The last point above is particularly important as agencies look to equip themselves to meet the digital, social media and content needs of their clients. Prosper Groups has helped several networks as well independent agency owners identify suitable acquisitions, both nationally and in specific regions.

Parties often enter into acquisition discussions with great excitement, but these transactions must be enacted with careful forethought. Both partners should conduct ample due diligence so they go into the deal with their eyes wide open. Thoughtful communication to the team is vital to avoiding unwanted surprise, disappointment, and key personnel departures. Go forward success requires that each party clearly understands his/her roles, responsibilities and performance expectations. For the sake of clarity and transparency for all involved, we work closely with our clients to manage this process.

If you are interested in growing through acquisition please contact our M&A practice leader, David Bosses, [email protected] or call 917.543.8839