Let’s talk honestly: company sales don’t just happen. A huge amount of work goes into every deal, and there will often be challenges to overcome during the process. I’ve had the privilege of working extensively on deals in the pharmaceutical marketing space, including advising Makara Healthcare Communications on their sale to Precision Medicine Group, and I’m currently advising another specialist independent healthcare communications business on their journey.
The market is always changing, with different themes and strategies emerging. But some things stay constant. Here, drawing on learnings from a wide range of BCMS transactions, I’ll try to highlight the areas agency owners should consider ahead of exploring a sale – whether that’s a few months or many years away.
Buyer motivation. Start thinking like your buyer – and try to shape and present your business around their strategic objectives. Will they want access to talent, new capabilities and services, new geographies, your client base, or therapeutic areas you specialise in? Understand this and you will be well on your way to making the best impression with potential buyers or investors.
Due Diligence is intensive and all company sales involve a huge amount of information exchange. Being prepared with the right information and analysis will make the process a lot smoother, and help maintain deal momentum.
Get ready to have your business examined in granular detail. Buyers will want to get a firm handle on understanding your finances and operations, and review your historic and projected financials, including treatment of deferred revenue. There will be focus on operational efficiencies such as project completion rates, over-servicing rates, staff utilisation and more.
Client relationships are crucial, and a buyer or investor will need clarity and detail around the arrangements you have with your customers. This encompasses the diversity of your client base, the therapy areas you cover, retention rates and contract types. Are you working with customers under MSAs or NDAs, and is your relationship based around one-off projects or ongoing deliverables? MSAs are preferred here, providing security of opportunity, with the proviso that you are “only as good as your last job”.
The number of contact points you have within your client is important too. Buyers always want to know who you’re dealing with, from procurement and the marketing department to channel managers. Generally, the rule is the more touchpoints the better!
These are people businesses… so a buyer’s knowledge of your workforce’s skillset will be paramount in discussions. They will want to understand how you retain the talent you need, and any issues with employee churn. What is your team’s background, how technical are they, how many therapeutic areas can they talk to?
There is a skill shortage in this area, so don’t be surprised to see LTIPs (Long Term Incentive Plans) make up part of your deal structure, as the acquirer quite reasonably looks to ‘lock in’ your team after sale.
Given the demand for talent, retaining your employees is critical. Buyers will want to know the culture you have developed in your business, and how you incentivise and retain key staff. In a competitive sale process (and yes, you should definitely be talking to more than one buyer initially), understanding the different cultures of your potential acquirers will help you choose the best cultural fit. Then you’ll be the one asking the tough questions: how will integration affect the staff? Does it provide them with greater opportunities? Will there be chances to develop new skills, or work with different teams?
Post-deal communications and change management. Typically, people fear change and there are few things more concerning for an employee than learning about change of ownership at the top.
Effective communication is everything. Having employees hear the news of a sale directly from your acquirer – and how this will impact them personally and professionally – will provide much-needed reassurance. In my experience, buyers will want to have ‘boots on the ground’ on day one, engaging and inspiring your people, be that through a Town Hall session, web calls or one-to-ones. Planning this effectively ahead of the deal itself will ensure as smooth a transition as possible.
Plenty to consider then. And I would say this… but the earlier you get some good advice on how to approach a potential sale, the better.
