Window Shopping: What PR Buyers Want From Sellers
By Matthew Schwartz
Sure, there are plenty of PR agency owners who prefer to roll right along, making their numbers, growing their clientele and expanding their services organically, without ever making acquisitions or putting themselves in play. But what if they ran their firm as if they were going to buy it?
The question was tackled during a general session earlier this month at the Counselors Academy spring conference in San Juan, Puerto Rico.
The session, titled How to Run Your Agency As If You Were Going to Buy It, featured Michael Lasky, partner/co-chair at law firm Davis & Gilbert LLP, and Peter Finn, founding partner of Finn Partners.
Finn has grown his firm to $72 million in net revenue, from $25 million when he launched Finn Partners in 2012.
In addition to showing that the prospect is both a strategic and cultural fit for Finn Partners, Finn said he looks for several key components in a seller. When a prospect seems like a good strategic and/or cultural fit then he will examine various components in order to pursue a transaction.
If Finn decides to go ahead with a transaction he asks the owners to stay on board during a five year earn-out period.
“The seller can benefit from continued growth of the business and help take it to the next level,” Finn said. “It’s a collaborative process” and the seller should “understand our goals and come up with plans to meet those goals.”
Lasky told agency owners in attendance that they should understand what buyers look for and how public relations firms are valued—regardless of whether they plan to sell their firms next year, five years from now or remain independently owned.
Some key factors in valuing a PR firm include year-over-year revenue and earning growth, a normalized profitability analysis, the expansion of business capabilities, the acquisition of new talent and clients and the creation of synergies and business efficiencies.
“If it’s all about one person, you’re buying a person, not a company,” Lasky said, adding that it’s crucial that owners offer top managers long-term cash incentive compensation or equity-based incentive compensation, to keep them in the game for the long-term. “Your corporate culture is critically important for recruitment and retention.”