Why agencies are different
An agency's assets go home every night. Revenue depends on a handful of client relationships, often held by a few senior people, under contracts that can usually be ended on short notice. That doesn't make agencies bad acquisitions. It means the deal has to be built around keeping relationships, not just buying revenue.
What to diligence
- Client concentration. How much revenue comes from the top clients, and how long have they stayed?
- Relationship owners. Who does each client actually talk to, and will they stay?
- Contract terms. Notice periods, assignment clauses and change-of-control provisions.
- Retainer vs. project mix. Recurring retainers are worth more than one-off projects.
- Margins by client. Some large clients are unprofitable once staff time is counted.
Deal structures that fit
| Structure | Why it helps |
|---|---|
| Earn-out | Ties part of the price to clients staying and growing |
| Retention packages | Keeps the people who hold the relationships |
| Asset purchase | Buys clients, staff and brand without inheriting liabilities |
| Rollover equity | Keeps founders invested in the combined business |
Our work includes several agency transactions, such as a regional communications agency acquisition, a specialist PR agency acquisition and a digital marketing agency asset acquisition.
Who holds each client
1Diligence: who holds each client2Structure: keep the people who hold them
Clients
Who holds the relationship
FounderEarn-outAccount directorRetention packageStrategy leadRetention package
Frequently asked questions
How are marketing agencies valued?
Usually on a multiple of earnings, adjusted for client concentration, retainer share, growth and how dependent the business is on its founders. Structure, such as earn-outs, often matters as much as the headline multiple.