Next generation game

Recent speculation about consultancy acquisitions has reminded me of a conversation I had about three years ago. The owner of one of London’s most lauded and applauded design consultancies was chewing over his options for the future. “Either I sell to one of the big boys, find the next generation from within the business or simply put up the closed sign,” he said.

A genuine dilemma, and one that all consultancies will be faced with at some point in the future. The burgeoning of the industry about 20 years ago means that the owners of many design businesses are now at a stage in their lives where they are ready to either drop out of the running altogether, or hand over the baton. It would follow, therefore, that we could be on the verge of seeing a flurry of “names” ready to realise their worth.

At this point many may raise a wry smile to the fact that, although few would claim to enter the industry for financial reward, a great number ultimately leave the industry for exactly the same reason. But this viewpoint deals with more than just the issue of making a fast buck. It’s also about succession.

Selling to “the big boys” has so far been the most viable alternative for very clear reasons. On the one hand, it offers a way to achieve the best possible price, while ensuring the consultancy you have lovingly created is handed over to someone who can safeguard the future of business. It also (in theory) promises access to new skills, complementary talent and, of course, new clients.

The downside of large corporation ownership, however, is that it counter argues the fact that the best creative people are in it for themselves, and not for the benefit of someone else. They are what marketing guru Charles Handy calls New Alchemists in his latest book. They create their “gold” out of passion, commitment and obsession. For them, getting a result is not primarily about building a bank balance, it is about creating difference. Financial reward is simply a nice by-product. Try telling that to your new owners whose previous motivations (understandably) lie with the folding stuff.

But is “For Sale” actually becoming less of an option in 1999? To whom do you sell? The obvious multinational communications groups now have full design portfolios; larger design groups are much more cautious about growth through acquisition; and multimedia has become the new darling of the advertising agencies.

There are other issues to consider. If the market becomes flooded with design consultancies seeking buyers will this effectively lead to widespread devaluation? And have some of the businesses now ready to contemplate sale effectively passed their “best before” date, either plateauing, or entering a natural decline? Might some proud owners end up like a disappointed participant, proferring their baubles on the Antiques Road Show?

Finding the next generation, while seemingly the most appealing option, can prove to be a very tall order. First, there appears to be a shortage of heirs-apparent and, even if there were, few are likely to have the necessary odd £100 000 in their back pocket to buy into ownership! And also, as the adage goes, why would you want to inherit someone else’s problems when you can create your own?

The real problem with second generation teams is that they naturally want to make their own impact and impression on a consultancy, and this may involve an uncomfortable renavigation of the business in an attempt to assert authority and make a mark. Almost by definition these are people who are highly unlikely to succeed in top management roles or frankly they would already have left the consultancy and be doing it for themselves.

The “Closed” sign option has an unquestionable air of credibility about it for certain star consultancies. Better quit when you’re still in charge of your own fortunes and creatively acclaimed (The Beatles and Fawlty Towers spring to mind) than end up with a new manager who forces you into panto or a summer season in Blackpool. But is this a realistic option for anyone other than a very small business? How on earth do you go about redeploying your work force and client base?

So there you have three possible scenarios. None exclusively wrong, and none that I, thankfully, will need to consider for several years. My message to those tempted to mutter a disparaging “selling out” whenever a design business is sold is to agree that while it may, in many ways, go against our instinct, so far we have yet to discover any real alternatives.