Plan for the long term to sell businesses, hears conference

Speaking at last week’s conference, Graeme Cade, executive vice-president mergers and acquisitions at Savanta Invest, said that maximising a business’ appeal to prospective buyers came down to a few key points, including knowing its strengths, cultures and, importantly, weaknesses.

Companies should be clear about what the challenges and weaknesses they face are, he added, to allow the acquirer to consider how they can help with the situation and how the prosepctive addition to the business could mesh with other parts of the company.

“To an acquirer like Savanta, knowing what your weaknesses are is very interesting,” Cade said. “We are not looking for the finished article – we are looking for someone we can bring in and can help and grow. We can only do that if there are weaknesses and things we can improve on.

“If you already have everything sorted and everything’s perfect, it’s probably not that interesting for us as there’s nothing we can really do with it.”

Prospective sellers should also have a growth plan that looks at both organic growth and how the acquirer could help the business grow. Any serious problems with the company should be addressed before seeking a buyer and there needs to be clarity on numbers, according to Cade.

There also needs to be a focus on future plans, including that of the founders. “Be upfront on what matters to you, so they can make sure that is front and foremost in the deal,” Cade explained.

“If you are looking to exit, what does a succession plan look like? Who are the key people in your business who will take this forward and drive it on? What are the incentive mechanisms in place that will keep them committed to the growth after you are gone? What are your potential blind spots that you will need the acquirer to pick up to help drive this business forward?”

Speaking in a panel session, Barrie Brien, group chief executive officer at Strat7, said that his business had approached prospective acquisitions with a view to exploring how both could benefit from a merger. “It started from their need to compete at a completely different level,” he explained. “They had got as far as they could go and they needed more funding.”

However, Brien added that there was a need for more innovation in the market research industry. “I love this industry, but I get super frustrated with it as well,” Brien said. “There are so many big groups doing the same old thing and clients getting super frustrated with it, and a lot of great agencies doing one small niche discipline and clients can’t ask them to do any more services.”

Brien added that a long-term approach to growing a business is vital. “Any agency owner or founder who is just buying to sell, typically it’s a disaster,” he said. “We have launched with the longer-term view of building a new business in this industry. I want to invest in building a business for the future.”

Speaking on the same panel, Debbie Newbould, founder and chief executive officer at Flume, said that she had worked to build up her business and had recently shifted focus to advisory work in reaction to changes in the industry.

“It was only two or three years ago where I felt the industry had moved on, and I didn’t want to be a player who was very binary – qualitative or quantitative research. I felt the industry was much more nuanced, and advisory was the space in which research should be positioning itself.”

Despite the need for patience, Newbould told the conference there were benefits to taking a more organic approach to growing a business. “You build up an agency that is perhaps a little more purposeful, as you are investing and relying very heavily on your team,” she said. “I am very proud of the fact that many of my team have been with me for several decades, and I feel we are doing this together.

“In the UK we are very focused on buying and selling, and I think we ought to celebrate an agency like mine which is not necessarily thinking of the end game, but thinking of what we can build sustainably to move on into future decades. It really shouldn’t matter if I’m there or not – it should create a team that not only wants to do fantastic work for its clients but also work and gel together really well.”