Stay put or sell up?

Knowing when to sell a successful consultancy, or indeed if to sell at all, is a critical decision business owners must make to capitalise on their success.

AKQA's San Francisco office
AKQA’s San Francisco office

After overseeing around ten years of growth and expansion, the challenge becomes how to bring in new business while remaining competitive, keeping a healthy balance sheet and maintaining the culture of the consultancy. For some, this decision is ultimately informed by knowing whether or not they can go any further as an independent.

Figtree co-founder Simon Myers saw his consultancy become fiercely competitive relatively quickly. Set up in 2004, by 2012 it had 40 staff and offices in London and Hong Kong. By December 2012 Figtree had been acquired by Prophet – a US consultancy with eight offices in the US and Europe and around 250 staff.

Prior to the takeover Myers says, ‘We were faced with projects broader then our skill set, particularly in analytics and customer journeys. Sometimes we’d be going into projects too late – after they had already started – and it’s important and more fun to start holistically.’

This meant that Figtree was not as competitive as it could be in pitching for and taking on bigger projects. Becoming a slightly larger consultancy with complementary skill sets and global footprint, would give it more manoeuvrability.

Myers says,‘Quite early on growth presents different strains and opportunities. In 2011 our turnover was £5 million. There were no outside investors, no board or non-execs and I think we were open to someone coming along who liked what we did and really wanted to help us grow the business so we could operate at a more international level.’

On a practical level, this also allowed Myers to tap into a consultancy with ‘a more professional attitude towards training and HR management,’ he says.

It seems that Myers was always mindful that Figtree wouldn’t be subsumed or suffocated by its buyer and he stresses that Prophet is a larger consultancy rather than a network.

‘We always said we were never that keen on selling to a network – an Omnicom or WPP. You hear lots of horror stories from creative agencies who have sold out like that,’ he says.

One consultancy presumably big enough to take the plunge with a network, however, is digital and interactive group AKQA. The company was an independent behemoth employing some 1160 people when it was bought by WPP last year in a deal that valued it at almost £350m.

AKQA was set up in 2001 by Ajaz Ahmed, who still runs the consultancy with current chairman Tom Bedecarré, who was chief executive when the deal went through in June 2012.

‘It’s fair to say that [WPP chief executive] Sir Martin Sorrell had been courting AKQA for a number of years and that his persistence certainly paid off in the end,’ says Bedecarré.

This is true it would seem, as Sorrell did say at the time of the takeover he had ‘admired AKQA’s creativity and technological skills for a long time’.

For AKQA, which is entering its biggest period of growth in a decade, it appears a sale was inevitable. In 2012 alone it opened four offices – Atlanta, Paris, Portland and Tokyo.

Bedecarré says: ‘Every entrepreneur is faced with the timing of seeking outside investors or contemplating a sale of the company. With our own private equity investors dating back to 2000, we were focused on delivering value to our shareholders while growing our business.’

In terms of selling to the right people, AKQA’s size gave it some leverage. ‘In our case, we were fortunate to be approached by all the leading firms in marketing services and technology services, so we didn’t have to go looking for buyers,’ says Bedecarré.

Both AKQA and Figtree have arguably successfully avoided being stifled or swallowed up by bigger companies, and one indicator as to why might be because they have hung on to their culture.

‘AKQA will always maintain an independent spirit and entrepreneurial values even as we grow larger and although we have joined the world’s largest marketing services firm,’ says Bedecarré.

‘Our company focuses on innovation and transforming businesses for the digital age, so we need to embrace change and keep raising our own goals even higher,’ he adds.

For Myers, Figtree is allowed to breathe because of the dovetailing of Prophet’s complementary skills. If there’s a level of creative autonomy a consultancy’s culture can live on without being snuffed out.

But if this culture had been forged over a long time some, like Precedent founder and chairman Paul Hoskins, think it’s worth protecting by remaining independent.

Consultancy Precedent was founded in 1989 and has expanded into the digital arena.

Precedent in London
Precedent in London

‘When you have spent more than two decades building not just a business, but a culture, a reputation, a loyal and talented team and a portfolio of clients and work that makes you extremely proud, I can’t think of a good enough reason to want to sell,’ says Hoskins.

For him, it’s simple. After growing the business and watching it become more profitable while surviving the recession, he says ‘Why wouldn’t you want to stay independent?’

Precedent has opened five new offices in the past six years. ‘The first was the toughest, the second slightly easier, and by the time we opened up our office in Melbourne last year, it was like riding a bike,’ says Hoskins.

Of course he recognises that timing and placement are key but also the process of sustained organic growth.

‘It has meant that there have been some great opportunities for our staff to grow and develop with us. Now, as growth is fast and furious, we have a core staff who have not only helped to build the ethos that has enabled us to succeed but who are also helping to shape Precedent’s future,’ says Hoskins.

The bottom line for Hoskins and other independent consultancy owners is to measure their success against whether or not they can cut it in an unforgiving pitch environment when they come up against networked groups.

‘While in theory the big groups have more resources to put on a project, the reality is that there is an optimum size for any project team. Bigger isn’t better. The correct size team means better results delivered quicker and a happy client,’ says Hoskins.

Visibility can be an issue though. ‘We know that we sometimes won’t get a crack at some of the multi- million pound projects out there because we are not part of a high-profile network so we are not on everyone’s radar, although this is changing as we get better known,’ he says.

As Hoskins sees it, some clients will feel the benefits offered by an independent are its accessibility and willingness to build long-term relationships, rather than simply hitting financial targets. Although it is possible networked groups can also offer these services.

‘We are a digital agency but we are here to build partnerships that in turn help to build better businesses,’ says Hoskins.

‘Unlike many of the larger networks, we invest in relationship managers whose job is not to sell but to look after and understand our client’s needs.

‘This way they know we are always there if they need us and we can ensure we can grow with them and are always aware of their changing business needs,’ he says.

Simon Farrell, founder of consultancy Tayburn, says, ‘We’re not selling what networked groups are selling.’

Tayburn's Edinburgh office
Tayburn’s Edinburgh office

This means that like Precedent, Tayburn can still be competitive. Farrell says, ‘I know we’ve won pitches recently against the big global, networked brand consultancies to work on large, multinational organisation brands. Not all multinationals want to work with large, cumbersome, profit-driven consultancies.’

For Tayburn though, being independent is about ‘having a genuine interest in solving the problem and not raking in the income’.

‘We give a personal touch and commitment to deliver that only the owners of a business can give,’ Farrell says.

If as a business owner you want to maintain growth or remain competitive with current resources, to sell or to stay independent is a question of moving forward with the best interests of the culture of the business, whether that means going it alone or looking for a buyer who holds the same vision as you.

 
How long did it take to sell your company and what was involved?

It’s fair to say that Sir Martin Sorrell had been courting AKQA for a number of years previously and that his persistence certainly paid off in the end. About 12 months ago in London we kicked off the latest conversations with WPP and within 90 days we were prepared to announce our partnership at Cannes.

Tom Bedecarré, chairman, AKQA

It’s about a years process in total. Until nearer to the end not a lot happens. There’s a period of floatation and swapping numbers before plans are made. It’s then that you meet people, and then finally an offer is made. There still has to be validation around data at that point, and lawyers are brought in. And then the signing of pages and pages of documents.

Simon Myers, co-founder, Figtree

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