EBITDA, growth, profit and loss, working capital, balance sheet, payroll. These are among the terms that come into play when a buyer is evaluating the acquisition of a PR agency. Dollars and cents, dollars and cents.
Having now facilitated the acquisition of more than fifty public relations and digital/interactive agencies over the course of some sixteen years I have reached the conclusion that one element has been vastly overlooked—the psychology of selling.
What do I mean by the psychology of selling? Namely the seller’s state of mind when making the determination to sell his or her agency. Selling an agency is a difficult decision. What are the motivating factors? Are those factors surrounded by fear, anxiety, dread and caution? Or are they surrounded by hope, optimism, excitement and comfort?
All of these factors will play a role in whether or not a seller will willingly and gladly put his firm on the market and see the process through.
Part of the process of selling an agency is coming to terms on an offer between seller and buyer. And here is where psychology comes into play. If a seller’s mental approach to acquisition negotiations is directed by fear and dread, the seller may then opt to ask for a purchase price that is well above market trends. And if the buyer refuses to budge the seller will walk—and heave a sigh of relief. All along, this seller really didn’t want to give up his agency. He felt compelled to but his heart wasn’t really in it. In fact this same seller may take the process all the way to agreement on terms and then walk at the last moment anyway.
But if a seller is truly motivated to sell, then he will be that much more flexible on an offer and pursue the acquisition process with vigor and enthusiasm.
Selling one’s PR agency is one of the most important decisions any PR agency owner makes in his life. A PR agency is one of the major assets in the founder or owner’s life and he wants to get its future just right. He can go on working until the day he dies. He can sell the agency to key employees. Or he can sell to an outside buyer.
Many PR agency CEOs have blinders on when it comes to conceptualizing the future course of his agency. It’s his baby and many CEOs don’t want anyone outside the family to nurse and nourish it. It’s like putting your own child up for adoption. Least of all a great big scorpion that comes swooping down to extract the spoils of a lifetime of effort. But consider the other options. What an agency CEO took a lifetime to build can come falling down if he were to suddenly become ill, lose some longstanding accounts, lose some key people—or die. What’s left?
This is why some sellers engage in the acquisition process rather reluctantly and with great hesitancy.
When I have preliminary discussions with prospective sellers, I take them through the pluses and minuses of selling. And again, it’s not just the dollars and cents. There are some strong willed agency owners out there who feel that they could never work for or report to anyone else. Their position is that they have run their own businesses for a long time and never had another boss.
I point out that they might reconsider if I found them a buyer who was compatible, understanding, collegial and flexible. And could offer skills and know-how that would benefit the seller’s firm greatly. And treat the seller like the respected human being the seller has worked hard to become.
And believe me, to my mind the most important attraction to selling an agency isn’t just the money. It’s the opportunity to grow the business with a viable owner/partner helping the process.
An acquisition isn’t based solely on numbers. It’s based on collaboration, mutual respect and alignment on goals and how to accomplish them. It’s based on the longstanding proposition that two plus two equals five. It’s vital to dig into the mindset and thinking of a prospective seller. You need to find out what makes the seller tick and how to continue to make him feel respected, wanted—and needed. If a buyer doesn’t get this he will fail.
A buyer simply must dig deep to find out where the seller’s head is at and what must be done to make an acquisition comfortable for the seller. A buyer must understand the seller’s wariness about having a new boss. A sophisticated buyer must address a seller’s fears, concerns, and comfort level.
The wise buyer understands this psychology. If pursued appropriately, then an acquisition can be a totally positive experience for both seller and buyer.
Art Stevens is managing partner of The Stevens Group, comprised of consultants to the PR agency profession and focusing on mergers, acquisitions and management consulting.