So you’ve sold your agency — congrats! Now you can relax on a beach and sip margaritas all day, right? If only life was that simple.
For many agencies, selling the company turns out to be a lot easier than managing the company after an acquisition. In this, the final column of this epic series, I’ll discuss how to keep team members happy, work with your new acquirer, and maintain your culture after an acquisition.
Surprise! We’ve been acquired!
Most investment bankers will strongly advise founders not to tell their team about an acquisition until after it happens. This often makes founders uncomfortable, especially if they have built a culture based on trust and transparency.
But there are many reasons to keep an acquisition secret. First, if the acquisition falls apart, you have to explain to your team why it didn’t happen, which can lead team members to worry about the health of the agency.
Second, if a team member shares the potential acquisition with a competitor or a client, this can have a negative impact on the business. (For example, a competitor might start calling up clients trying to poach them by suggesting your agency will be going through a period of instability.)
Of course, this doesn’t mean that you should outright lie to team members about a possible transaction. For example, if a bunch of people in suits are coming into the office and meeting with executives every day, team members may ask whether an acquisition is taking place. In our situation, I told my team the following:
“Over the next few months, you may see a lot of people coming into the office in suits. These may be investment bankers, they may be lawyers, they may be people that want to acquire us, and they may be people that we want to acquire. We’re always open to talking to people that want to partner with us, but that doesn’t mean a deal is absolutely going to happen.”
So when the deal is finally signed, and you are ready to tell the team, the key is to have a clear communication plan and anticipate so as to be ready to respond immediately to questions. In our case, we ended up having three separate meetings with our team:
We called all senior managers to a confidential meeting on Sunday night, the night before the acquisition. We walked them through a PowerPoint and asked them for feedback; then we gave them talking points for how to talk to their team.
The next morning, we had a mandatory all-hands meeting scheduled for about an hour after the acquisition was announced. We walked through the same PowerPoint and again asked for questions from the team.
That day, we made senior executives of both 3Q Digital and Harte Hanks (the acquirer) available (with at least one in every one of our offices) available to talk to people one-on-one.
In terms of what questions to anticipate, here are a few that we got:
Will anyone lose their jobs?
Will we lose our benefits?
Are any of the executives quitting?
Will we have to move to new offices?
What were the terms of the deal?
Are we changing the name of the company?
Keeping team members and clients happy
One of the biggest risks in an agency acquisition is attrition of both team members and clients. Sometimes this happens because some people just don’t like change; other times it is because the acquisition has an actual negative impact.
I have always believed that the key to agency success looks something like this:
Put another way, without great people, an agency will fail; without great culture, you can’t hire or keep great people. So without great people and great culture, clients won’t be happy!
But unless you specifically put provisions in your acquisition contract to maintain complete control of your team, benefits and culture, it is likely that you won’t be able to preserve the entirety of your culture post-acquisition. So here are some tips to keep both clients and team happy:
Control the message: Especially with clients, have a communication plan ready for deployment as soon as the acquisition is announced. For top clients, sending a personal email, making a call or making a visit is recommended to answer any questions and dispel any rumors.
Fight for what matters: Are in-office massages absolutely crucial to retaining your people? If not, fight for the things that are crucial and let the small things go. Culture can change and still be great; it doesn’t have to be static.
Emphasize opportunities on both sides: Change can be a good thing. For clients, a merger can mean new service offerings. For team members, being part of a bigger company can mean opportunities for advancement or learning new skills.
Align incentives: Consider giving clients and team members additional reasons to be loyal. For team members, this could mean bonuses based on company performance against an earn-out; for clients, it might mean free or discounted services to show them your continued commitment to their business.
Working with your acquirer
Hopefully, you’ve chosen an acquirer that shares your values and with whom integration will be seamless. And hopefully, you’ve also negotiated contractual terms that give you protections if the acquirer isn’t holding up their end of the bargain. Inevitably, however, there will be some friction when two companies join forces.
During our acquisition, we developed an integration plan that spelled out — day by day — how we would move forward once the deal was announced. This was helpful, as it assigned roles and responsibilities on both sides, which reduced potential turf wars over ownership.
Of course, you can’t anticipate every potential issue pre-acquisition, so challenges did arise. Here are a few that, in hindsight, I would have put more focus on:
Duplicate roles: What happens if the acquirer and acquiree both offer the same services? Should the two teams continue to operate separately, should one be eliminated, or should they be merged into one cohesive group?
Sales training: One of the expectations that many agencies have when they are acquired is that the acquirer’s sales team will bring them a lot more business. This can happen, but only if the sales team is familiar with your service offerings and has the proper incentives to sell your products. So spending a lot of time educating the sales team about what you do and why you are different, and making sure that they get commission for selling your services, is vitally important.
Operations integration: In many acquisitions, operations (HR, finance, legal, physical plant) is consolidated with the parent company. This is often an easy way for the parent to save money and improve the finances of the deal. Finances alone, however, are not the only metric in determining what is best for the companies. If, for example, the parent company has a restrictive PTO policy and the acquired agency has a relaxed policy, simply switching to the parent’s team and rules could cause team attrition.
You made it!
Most agency founders I know did not start their company with the intent of getting acquired, which means that they are often unprepared when acquirers start reaching out to them. My hope is that this series of columns will help founders enter into the acquisition process in the future with at least a foundation of knowledge.
Of course, every company and every acquisition is different, so your experience will vary significantly from mine. I hope my tips will make the process as smooth as possible for you. Good luck!
Comments