Rick GouldRick Gould

As the PR M&A market continues to percolate with additional transactions — and rumors swirl about other potential deals — more and more suitors are circling the wagons and eyeing PR firms that can bolster their portfolio and deepen their bench. 

Each potential PR M&A transaction is unique, of course. Factors such as financials, sales and marketing strategy, cultural fit and business development differ from one possible transaction to another.  But, when it comes to the essential assets of what buyers are looking to acquire, similar questions emerge.

Before companies interested in acquiring PR firms dig in their heels — and begin to negotiate price — they will ask seller firms several pointed questions about their companies. PR firm owners must ensure their answers are concise — with specific examples/metrics they can point to — and don’t suffer from any mystery. 

Here are three specific sets of questions potential buyers are most likely to ask seller firms. The first set of questions is about the big picture.

•  Is it an established agency? How so?

•  What is the firm’s reputation in local, regional and national markets?

•  Do the owners have a brand name? Are the owners known as thought leaders and / experts in their fields?

•  Is the agency’s office in a desirable location, whether a big city or the suburbs?

•  Does the firm belong to any trade organizations, such as the PRSA’s Counselors Academy and PR Council, and/or global PR networks, including PR Boutiques International, PR Global Network, PROI, PR World Alliance, IPREX, Worldcom Public Relations and others.  

Buyers’ questions will then become more granular. They will inquire about the organization’s management and staff and ask all or a combination of the following questions:

•  What are the intentions of the critical second tier of management, which will be on the hook to grow the agency once a deal is done?

•  Will the second-tier of management be excited about a larger firm with more capabilities, technology and depth? Any doubts expressed among the second tier of management may put the kibosh on a deal.

•  Who are the new-business rainmakers?

•  Are there incentive plans in place for the rainmakers?

•  How billable are staff members, at all levels?

The set of questions above plays into the final group of questions, this one regarding client makeup. Prospective buyers will want a full accounting of the seller’s clientele.

•  Who is handling each client?

•  What projects are currently under way?

•  What are the net revenues per client for the past three full years? What are the projected revenues for the current year?

• What clients were lost and why?

• How is the firm’s retainer history? How long has each client been with the firm?

Questions that revolve around the firm’s digital/online strategy will also be front and center. Toss in how the firm monetizes the social channels now at the core of marketing communications.  Prospective buyers also will want to know about the seller’s appetite to recruit talent in the areas of data management and online analytics.

The questions above may come in different configurations, depending on the individual buyer’s needs.

Before moving forward buyers will also want to be assured about seller expectations and desires. To gather information in this area, buyers will ask two pointed questions: What is the seller’s expectations in terms of position and title? and How attached is the seller to retaining her firm? The very last question is a delicate one, that’s seldom easy to answer.

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Rick Gould, CPA, J.D., is Managing Partner of Gould+Partners. He is 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.” He can be reached at [email protected].