I have several friends who have sold their successful businesses to the big global groups in recent times and the pre and post sale mentality is extremely consistent across a number of people. During the pre-sale period the vendor(s) feel wanted and important with the prospect of a big pay day looming – all very good for the ego and well being of the people concerned. However post-sale, different feelings; the courting certainly stops abruptly and the train set is owned by someone else. Added to which the vendor with 10/15/20 years of independence is now working in a corporate structure, with a boss, reporting, 3 day management meetings in a wind swept, out of season Club Med, having to be nice to people you had turned down for a job at your own place (and how the worm can turn!).
Having been through the same process I know exactly what it is like and I guess most of us don’t attempt to have a glimpse around the door of the suitor just in case we might not like what what we see.
Almost everyone I know who has sold their business has walked away after a period of time; rarely has it got to do with the fact they can afford to, it is always out of frustration and unhappiness. Which is understandable because anyone who has built a successful, independent business finds it very hard working for someone else. I don’t believe this is an ego thing, it’s just the wiring of the corporate mind versus the entrepreneurial mind – they are opposite on almost every dimension. Oil and water, chalk and cheese, etc.
Which takes me to the next observation – what is the buyer buying? I would have thought the heart of a successful business in the advertising/marketing world is highly likely got something to do with the founders. They set the agenda, had the bottle to do it, risked a lot, gave up a lot, stuck to the mission, hired and fired, built a culture. Built a culture, that vital ingredient in the fabric of every successful agency. If the founders leave how does culture continue as it can’t be prescribed in a company manual? Well it doesn’t survive, or very very rarely. And there are some very notable exceptions.
I have been involved in numerous start-ups plus acquisitions of established businesses and one almost exclusively deals with the principals of the target business; after all they are usually the major shareholders and the people who will say yes or no. In my experience it has been very difficult to go deeper on people out of confidentiality and legal restraint. When we sold to Omnicom their focus was purely Simons Palmer, it took quite a lot of pushing to get them interested in Manning Gottlieb Media but when they did they realised they had also acquired a class media business. Interestingly Colin Gottlieb has made the smooth transition to ruler of the western world as President of OMD EMEA.
So the buyer must believe retaining the culture is something low on the list of priorities, retaining clients and income being far more important. Yes but, yes but.. the clients and the income were there in the first place because of the culture of the agency… and so on. There are plenty of examples of agencies doing nose dives in a short space of time following being acquired and of course ones that grow and prosper.
One positive example and one I’ve admired for years was the acquisition of Rainey Kelly Campbell Roalf by Y&R, known as RKCR/Y&R. The legacy of RK and C who all went on to to other things, Roalf remains as Chairman, has been pretty impressive. The Virgin Atlantic work is superb, the 25th anniversary tv spot is one of my all time favourites, plus the work for M&S which is again excellent (although I think it presents a different M&S to one I go in to on the Kings Road). The RKCR implant seemed to refresh a tired US branch office and somehow the culture and energy of RKCR infected the building in Mornington Crescent.
I wonder if it is at all possible to have some sort of profile testing process pre-sale so that both sides understand the fit of the vendors. Let’s say for the sake of my little commentary that more than 50% of the founders of an acquired business will walk within 2 years, wouldn’t it make sense for both parties to understand the likelihood before the sale? It would save an awful lot of wasted time, money, disruption plus could define the role of the founder during and after the sale. It would also inform the buyer on the key slots that will become open.
Returning to my friends who are in this boat at the moment they are treading water whilst various earn-out conditions are flowing through the business whereas they could be deployed on tasks that make them happy and contribute to the buyers investment. You can see why the investment community are not fans of funding people businesses. Lifts and assets come to mind.