PR Agency M&A Market Poised For Rebound

By Rick Gould, CPA, JD

October 1, 2010

After almost two years in the doldrums, PR agencies are aggressively eyeing strategic acquisition opportunities in North America and beyond.

Our firm currently has 33 agencies looking to buy, compared to 21 that are up for sale.

This compares to a situation that was considerably more bleak at the beginning of 2010. We had no buyers at the beginning of this year, Now, it’s extremely active.

Buoyed by a solid first half of this year acquisition intent began to improve at the start of the third quarter. MDC Partners CEO Miles Nadal set the pace with several acquisitions including rapidly growing Allison & Partners and most recently Kwittken & Co. Nadal recently revealed to The Holmes Report Partner and Managing Editor Arum Sudhaman that he is aiming to spend upwards of $50 million on PR agency purchases.

In terms of capabilities, agencies are particularly interested in adding skills in digital, social media, healthcare, public affairs and crisis management. Next Fifteen recently bought two digital agencies within one week, while Huntsworth Group, MDC Partners and Edelman have all snapped up firms in the past few weeks. Edelman just announced this week the acquisition of Texas powerhouse Vollmer Public Relations. Our firm represented Vollmer as strategic advisors and is working with almost all of the major buyers on strategic acquisitions.

In addition, The Holmes Report disclosed that they are aware of a number of firms seeking acquisitions in continental Europe, the UK and key Asian markets such as China and India.

However, while interest is high, continued caution on the part of buyers is being reflected by length of time it is taking for deals to complete. In the past, buyers did not do enough due diligence. Not anymore. The due diligence is extensive and thorough. When a buyer is paying several hundred thousands or millions of dollars for an acquisition they have every right to know about the financial history, the staff and the clients. Buyers are experienced and savvy at the drill. What we do is facilitate the process by getting the seller ready before this lengthy review begins.

The majority of deals that fail are as a result of the seller believing their firm is worth more than it is.

The key to a successful M&A transaction is for both buyers and sellers to be reasonable and fair and let PR industry precedent dictate the model used for the sale.