When selling your agency, it’s important to know which type of buyer is best aligned with what you want. That is why you should have an understanding of the different types of buyers of marketing agencies. There are three typical types of agency buyers. Of the three, they vary in reasons for buying, and they approach buying an agency with totally different goals in mind. Here’s a quick guide to help you navigate the types of buyers for your agency.
The Strategic Buyer
Strategic buyers are generally larger agencies looking to acquire a bolt-on to their existing business. They often buy agencies for their geographic location, industry expertise, service offerings, or standout teams.
We love strategic buyers because they understand the ins and outs of running an agency. Plus, they often succeed post-transaction thanks to their prior experience. Strategic buyers also allow your team to join a growing ecosystem with new career opportunities. Lastly, they offer immediate cross-sell and up-sell potential.
While strategic buyers come with advantages, a few drawbacks exist. The biggest? They may offer less cash at close than other buyer types. Also, merging cultures can prove challenging
The Financial Buyer
These types of buyers often include private equity firms and/or family offices. Almost always they have the goal of selling the business for a higher price in three to five years. They tend to aggressively pursue their agendas to maximize their investment return as quickly as possible.
We love to work with financial buyers for a few reasons. They bring external resources to an agency to supercharge growth. Also, founders often get to stay on board post-transaction, which is a great option if the founder would like to continue to operate day-to-day aspects of the agency. Additionally, if you make it through due diligence, deal structures can be favorable.
However, there are some potential negatives. Financial buyers generally use debt to finance the transaction, which can make the process take significantly longer, and due diligence is often much more extensive. Another potential negative is that they may not understand the agency space as much as a strategic buyer would.
The Solo-Entrepreneur Buyer
An entrepreneur buyer is typically someone purchasing a business to run themselves. Often, they are location agnostic and interested in entrepreneurship. However, they may not want to build something from scratch. Instead, they prefer acquiring an existing agency to grow or add to a modest investment portfolio. In many cases, solo-entrepreneurs are willing to pay top dollar for the right business. As a result, they tend to be highly committed and focused. They are also less likely to sell the business in the short term.
On the other hand, there are some potential downsides to this buyer type. For example, solo-entrepreneurs often require extra support during the transaction process. Additionally, post-acquisition success can vary due to limited agency experience. Therefore, it’s important to assess their background and preparedness before moving forward.
Post-Transaction Goals
Each seller has different goals in exiting, ranging from their transition commitment after the sale to maximizing price or maintaining the company legacy – and this is where matchmaking is critical. Remember, when selling your business it pays to know the buyer you want, and this starts with identifying your own goals.
- If you want a quick exit, you might want to have an entrepreneur or strategic buyer.
- If you want an amazing place to work post-transaction, a strategic agency buyer and certain financial buyers are most likely the right fit for you.
- If you want to supercharge growth, a strategic agency buyer or a financial buyer is likely the right fit for you.
- If you want the most cash at close, a financial or entrepreneur buyer is most likely the right fit for you.
- If you’re okay with taking less cash at the close in exchange for profit-sharing, a strategic agency buyer is most likely the right choice.
- If you want your team to have an amazing career after the transaction, a strategic buyer might be the way to go.
When you hire an advisor like Merge, our role is to provide you with as many buyer options as possible, giving you the freedom to make the right decision for yourself, your team, and your clients. There are a handful of options for buyers of your agency and it is important to spend time thinking about the right fit. Whether a strategic, financial, or entrepreneur buyer is ultimately the right choice for you, understanding your post-transaction goals and keeping an open mind throughout the process will help you land the right choice.
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