Jackson, Dean and McKay share their M&A experiences
Owners and directors of agencies from across the North gathered yesterday afternoon to hear and quiz Martin Jackson, CFO of McCann World Group, Phil Dean, MD of Turn-Key London and Neil McKay, CEO of Lakestar McCann, about their varied experiences of building, developing, selling and buying agencies.
The 90 minute session held at Barclay’s dedicated TMT unit in Manchester was supported by Better Placed Recruitment, the sponsor of the Top 50 Integrated Agencies ranking which predated this follow-up event.
Richard Walker of Mustard Research also offered an overview of the research methodology employed to create the ranking which as published last November.
Phil Dean described himself as a ‘mainstay’ character in advertising and proceed to run through the various stages of his career, always keeping a weather eye on the subject of the day: building, buying and selling agencies.
Phil’s first experience of a sale left a bitter taste in his mouth. Trained as a graphic designer in his home town of Leeds, he joined a local design agency PFB. Life was good there but one day it was acquired by a printing company and in the course of several months, the business fell apart as the printers had no empathy or understanding of what a creatively-led business was like.
He moved onto the legendary design agency Attik where he ultimately held responsibility for the Huddersfield and London offices. Attik was hugely ambitious and opened offices in the States and elsewhere and life was good until 9/11 happened and business and cash became tight, particularly Stateside. Ironically though he said, that was accompanied by an increase in the number of folk knocking on Attik’s door and in due course the company was sold to the Japanese multi-national Dentsu.
Phil however, didn’t fancy that and chose to go back to something much modest and joined four man Thompson Brand partners in 2003.
Two years later, staff numbers had risen to 18 and turnover from £400k to c£2m. However, the rapid growth prompted a lot of soul-searching from the owner who ultimately seemed to really only want a life-style business – and Phil wanted more. He joined Communisis plc to head up a new integrated marketing services offer for the Leeds-based printer. In this role he came across numerous agencies who wished to sell and he said he quickly learnt to spot those bosses who were tired or had had enough and simply wished to exit, rather than stay if acquired and take the business onto new heights. In some other cases, Phil said he actively advised owners who had great businesses who he felt wouldn’t be a cultural match for Communis, that they’d be better off staying independent. The pressure of reporting in a plc is quite different and much more demanding than the pressure within a private company he stressed.
With a final nod to the make-up of the audience last night, he cautioned agency bosses that if their aim is really to ultimately sell the business, why not sell it to the management team rather than sell the agency and stay on board for three years. “Be careful of what you wish for…”
Neil McKay began by asking the audience what their objective really was in building their agencies.
He put up a slide taken from a Lakestar board meeting and dated December 2007. The legend on the slide said: “Create and sell our agency within five years to a large organisation that has the cash to buy us and which could help us grow faster than we could grow on our own.”
And he ran through the key criteria that be believes made Lakestar – and other agencies – attractive to would-be suitors:
Financials incorporating consistent growth and profitability
Quality of management
Quality of staff
Neil also added to Phil’s caution by advising that the required single-minded road to a successful sale offered no shade for directors and colleagues who might occasionally prefer to hide.
And ensure said Neil that the advisers you choose are first rate. The corporate finance boutique he retained to advise and lead Lakestar through the sale process was Results International in London. (Keith Hunt, one of the directors of Results spoke at Prolific North’s Digital Agencies event last week). Ironically Neil chose Results because he’d been on the other side of a deal with them and had found them to be a pain in the arse but he had recognised what a cracking job they’d done for their client…
Results prepared an Information memorandum and went to market. Seven parties expressed interest and four offers were subsequently tabled. McCanns won out because Neil felt they offered the best fit for Lakestar’s clients and his colleagues.
The final speaker, Martin Jackson, the chief financial officer of McCann World Group in London began by advising that every acquisition was different.
Martin’s criteria when considering a potential acquisition is based on:
Strong financials – both historical and projected
A sound strategic/technical fit
That any deal will be margin enhancing
And that any acquisition will be with the strongest possible option in that sector/niche
Martin reinforced the structural and long-term of successful deal-doing by highlighting an image from a Las Vegas marriage suggesting that the ‘quickie’ approach should be the last thing on the seller’s mind…
He also said that honesty through the negotiations was always the best policy and that the due diligence was always interesting as invariably all sorts of unusual aspects of the seller’s business are gradually unearthed…
However, the completion meeting was merely the first stage in the long-term new found relationship. The real hard work starts post-completion he advised.
Stacks of commitment and communication on both sides is essential.
Regular post acquisition reviews, detailed financials examining sales, margins and projections, client and staff retention and development, any arising integration issues and new business: together a heady mix of detail, mentoring and investment support.
Martin’s parting advice to would-be sellers was don’t lose focus when you decide it’s time to sell, do assemble the right team, be open and honest about your plans and performance, communicate as clearly as you can and….do allow yourself to enjoy what is usually an enjoyable process…