When it comes to a growth strategy, which route is best: building your business gradually or making a lump-sum acquisition?
Like most CEOs, I’d tend to lean toward the first option. It makes sense to focus intently on the tasks at hand — serving current clients, growing existing accounts organically and adding new business in a careful, thoughtful manner. Do all these things well and you’ll build a successful and sustainable business. But when is making an acquisition the right move for your business?
This will vary based on the circumstances that individual firms and their leaders face. Sometimes the deal is just too good to pass up, so you pull the trigger. Other times it just doesn’t feel right, so you walk away.
Our firm has now made two acquisitions, and if there is anything I’ve learned, it’s that the process is never easy. Our management team has talked through the evaluation process extensively, and we’ve settled on five signs that the time is right to make an acquisition:
1. Your existing clients are demanding it.
You’ve heard the line: It’s all about location, location, location. That’s fine when you’re talking about buying a home or finding office space. But in the PR/marketing business, technology’s ability to connect us all virtually has pushed location down on the priority list, right?
Not always. In recent years, our clients have told us, loud and clear, that they value having a marketing partner down the street to meet with face-to-face on a regular basis. A brand’s ability to penetrate new markets — whether locally, nationally or globally — is impacted to a certain extent by what regions its marketing and PR partner is located in.
The solution? Opening up a satellite office or two could work. Or, to accelerate the process, you could acquire an existing firm with talent in place and an established reputation in the market.
2. New prospects are excluding you from opportunities.
Geography comes into play here, as well. For example, if you don’t have a West Coast presence, some prospective clients will eliminate your firm from consideration before you can even finish your RFP. One way to ensure you have the West Coast presence that qualifies you for that lucrative engagement would be to purchase an agency with resources and credibility in that locale. That’s exactly what we did in 2015.
Business mix is important, too. Sometimes a prospect will require its agency to have a deep-rooted capability in a specific niche, like health care PR, influencer relations or analyst relations. These skills can be built from within, or you might consider acquiring that capability.
3. Your stagnant revenue base needs an energy kick.
Even well-run businesses experience occasional lulls on the revenue front. The numbers flatten out for several years, frustrating the management team and forcing the organization to retool. It happened to us over a decade ago, leading us to look at acquisitions to get us back on track.
Purchasing an established firm with a presence in four markets allowed us to broaden our revenue base and inject energy into our infrastructure in other ways. Growing an organization’s revenue and pushing gains to the bottom line gives it flexibility on a variety of fronts. This includes being able to compete for larger accounts and make more investments in initiatives such as IT and employee development.
4. It’s time for you to embrace a new personal challenge.
As a CEO and entrepreneur, you’d like to think that the business you’ve built would always provide a challenge. To a large extent, it does. There’s always a hurdle to cross, a goal to achieve. But maybe you’re ready for a bigger challenge — to lead a larger, more diverse organization with a higher ceiling. You try to create growth opportunities for your staff, but what about for yourself? You, too, want to keep learning and stay inspired. Ten or 15 years down the line, do you want to ask yourself, “Why didn’t I take the chance when I could have?”
This is how I felt in recent years when our firm stepped up to look at a number of potential acquisitions. After leading PAN for nearly a quarter-century, I felt the need to take our business to a new level. I relished the challenges that would come from running a company with multiple U.S. locations and extending overseas. It felt like the right time to go outside of my personal comfort zone. If you’re feeling this way, you might be ready to take that chance.
5. Your employees are looking to spread their wings.
These days, employees are looking for more than a stable job where they can punch into the same office year after year. They want experiences. They want to move around, try other cities, sample new cuisines and advance their careers in the process.
Acquiring a firm in another location gives your organization an added tool to retain top talent. Employees looking to branch out and try a new location can do so while still working for you. Thanks to our acquisition several years ago, and now our recent international expansion, our firm has offices in five diverse locations — Boston, San Francisco, New York, Orlando and London. We’ve had employees come to us with requests to move east, west, north and south. They’ve relocated and stayed with us. Some have even relocated back to where they started.
Acquisitions can be risky and disruptive. But sometimes they can provide just what an agency needs to get where it wants to go. So, if you’re on the fence about whether an acquisition is right, consider how these five signs fit in with your firm’s trajectory. Are you meeting the demands of your clients, prospects and employees, or is the time right for you to consider an acquisition?
