An overwhelming majority of independent PR firm owners expect to sell their firms and have given equity to top managers with an eye on succession and attracting buyers, according to a study by The Stevens Group.

Veteran PR industry M&A counselor Art Stevens said he was surprised to find many – nearly one quarter -- agency principals own less than 100% of their firms. "Many agency owners have put together 'golden handcuffs' to retain such managers by means of real stock, phantom stock and generous bonuses and incentives," he said. "In today’s robust M&A marketplace, they realize that to position their firm for acquisition, they must hold on to their key second tier managers.”

Stevens' survey focused mainly on about 100 principals at firms with up to $5M in revenue and a few in the $5M-$10M range. The majority of respondents were aged 40-60 years old.

Ninety-two percent of firm owners said they will sell at some point and 44% slate a sale within in next five years, according to the survey. Post-sale, many said they would continue to toil at the agencies they built as Stevens found that 64% said they want to keep working at the firm after any employment contract ends.

Cashing Out

Agency owners gave three main reasons for wanting to sell: cash out and retire, cash and do something else, or to position the firm to compete for bigger business. Dozens said their firms are doing well but have "hit a wall" and can't see major growth without a significant increase in "mass." Others want to dump administrative responsibilities on a buyer to focus more on creative work, according to Stevens. [Full findings at thestevensgroup.com.]

So what's holding back the sales? Most (61%) agency owners said they are waiting to increase revenues, while others want to strengthen their management teams (34%) or first increase profitability (27%).