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M&A in the media sector

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With the media sector in the north of England booming, we have seen lots of M&A activity in recent years as larger agencies seek continued growth by acquiring specialist divisions.

Digital and SEO agencies are in particular demand and there is a trend towards media businesses expanding to become full service in what is an extremely fast moving industry.  Given the increasing number of acquisitions and sales in this sector, we have worked with many media agencies and developed a real understanding of media businesses.  Our specialism in the sector also means that we are well connected and can facilitate introductions between complementary businesses.

As with any business sale, early planning is essential to ensure that you have prepared your business and are able to present it in the most attractive way – not only will this make the sales process leaner and quicker, it will also maximise your sale price. As part of this process, take a long, hard look at your business and cut out any unnecessary costs to ensure that it is as lean and efficient at possible for potential purchasers.

Given the lack of tangible assets in many media agencies, funding for growth can also be a challenge.  Often, media businesses turn to cash flow or invoice funding and, if you find yourself in this situation, it is vital that you can demonstrate a strong history of good trading. 

What’s more, by ensuring that all of your processes and paperwork are in good order, there’s also less likelihood of price chipping at a later stage.  Often, the acquirer is seeking to ‘buy’ the client base and so ensuring that robust contracts are in place to tie in clients and protect the value of the business, is a good starting point.

As well as gaining clients, media agencies are frequently trying to acquire a particular skillset.  In an industry which has many consultants, bringing expertise in house and motivating the new team members to stay, is a way of safeguarding the business.  On the creative side, it is actually the people who represent the value of the business and, therefore, it is important to get the management structure right and ensure that all members of the team are not only tied to the company, but are also incentivised to stay.  Often, EMIs and share options are used to ensure that employees are brought on the journey and share the same long term goal.

Home Group is a great example of a media business which has got it right and seen phenomenal growth as a result.  From its humble beginnings in 2002 as a traditional advertising agency with a staff of just five people, it has grown both organically and by acquisition and now comprises 13 companies offering clients a full range of integrated marketing services.  The £25m turnover group, which completed six acquisitions in just 18 months, now employs a 177-strong team and boasts offices in London, Gibraltar and Sydney as well as Leeds. 

Dave Sewards, chief executive of Home Group, explains, “Marketing trends tend to go in cycles – during the 70s and 80s integrated agencies were in vogue, but by the 90s specialist agencies were in demand.  We’ve benefitted from a move back to integrated agencies with clients wanting a joined-up approach to communications, with all services available from a single source. 

“We have an ambitious three year plan with significant growth expected through acquisition and by selling a wider range of services to our existing client base.  A key to our success has been partnering with professionals who really understand our business and can provide real insight.  We started working with Clarion four years ago following a recommendation and the team has proved invaluable, taking on a more far-reaching role as business advisers rather than just lawyers.”

If you’re interested in buying or selling a media business, please do give me a ring on 0113 336 3387 for a completely confidential chat.

Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.