Time to sell the agency? Outlook from Results International
Despite ever increasing economic gloom, the outlook for the marketing communications sector remains relatively positive, writes Andy Collins, senior partner at Results International, the adviser to agency owners looking to sell.
Radical changes in media consumption are creating disruption, which always leads to opportunities. And though we're unlikely to see the high deal volumes of the past few years, smartly managed business are still able to command interest from prospective buyers.
Businesses in areas including digital, new-style direct marketing (ie with a focus on email, data capture and analytics), public relations and research will continue to see strong appetite from buyers.
Although challenging, trade sales remain an attractive prospect for quality vendors. Most major marcoms networks still have access to funds and, with relatively stable share prices, many are still looking to bulk up their offering.
The greatest opportunities lie with privately owned groups, away from the depressed capital markets.
At Results, we've seen some strong private groups developing, with heavy appetites for acquisition, particularly amongst those funded through private equity money.
New players from the US and the Far East are entering the market, and given a fantastic track record of private equity-funded exits, interest in the marcoms sector remains high.
Private equity houses are extremely well educated on the sector -- they know what they want and where to find it. These buyers are looking for agencies with high growth, at least 15%, and strong margins of between 20%-30%.
Value-added services remain key and companies that provide clients with "think for me" type strategic services are most attractive. Of course, a coveted client base and a well-respected management team are essential ingredients.
At the same time, buyers are most interested in specialist businesses, so companies looking to shape themselves for the future should think about focusing their services and creating lock-in products.
In conclusion, we expect 2008 to continue to hold up. Yes, we will see more wariness and concern about the future and companies will need to manage their businesses efficiently.
However, while questions remain about 2009 performance, overall sector trading performance for 2008 is expected to stay healthy. There are still ways to realise value and sell your business -- we remain really busy at Results and for us, that's always an encouraging sign.
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