Selling
What acquirers look for in an agency
Buyers are not looking for a perfect business. They are answering four questions with evidence, and the answers decide whether they proceed, what they pay, how they structure it and what protection they ask for. This guide explains the questions, the evidence and the consequences.
In short: Every acquirer, whatever its type, is answering four questions: are the earnings of good quality, will the business transfer intact, is it strategically relevant and scarce, and what will it cost to integrate. Each question is answered with evidence; assertion does not count. Findings do not produce automatic penalties, and a single finding can touch several parts of a deal at once: the earnings the buyer underwrites, the valuation, its financing, the structure, the contractual protection, the timetable and the ability to complete. Sellers who understand this can present evidence first and shape the consequence.
The four questions
- Quality of earnings. Is the profit real, recurring and sustainable under new ownership? What is the fee the agency keeps, how is revenue recognised, what has been normalised and does the forecast have a track record?
- Transferability. Will the clients, the people and the know-how still be there a year after completion, when the founders have less reason to stay and the buyer’s name is on the door?
- Strategic relevance and scarcity. Does the business give the buyer something it wants and cannot easily build or buy elsewhere? Scarcity supports the multiple; a capability available from many sellers does not.
- Integration burden. How much work, cost and risk will it take to bring the business into the buyer’s group, systems, contracts and culture, and what might break in the process?
A buyer’s type changes the weight on each question. A strategic buyer cares most about relevance and integration; an investor about earnings quality and transferability; a group about how the business fits a portfolio and what it costs to run from the centre. Choosing the right buyer covers the types.
The evidence buyers test
| Question | Evidence buyers ask for |
|---|---|
| Quality of earnings | Three years of management accounts reconciled to statutory accounts; defined revenue, net revenue and gross profit; revenue by client, service and type; the normalised EBITDA bridge with support for each adjustment; revenue recognition policy; monthly working capital and cash conversion; forecast against actual for prior years |
| Transferability | Client contracts, terms, notice periods and change of control clauses; who owns each relationship; client tenure and growth; leadership below the founders and how long it has been in place; retention arrangements; staff turnover; IP assignments |
| Strategic relevance and scarcity | Evidence of specialism: client list, case studies, pricing, win rates, awards and referrals; how many comparable businesses exist; what the buyer would have to do to build the capability itself |
| Integration burden | Systems and licences; contract terms that need novation or consent; employment terms against the buyer’s; property; regulatory matters; the cultural fit of the leadership team; what the founders expect to keep control of |
The pattern is consistent: buyers believe what reconciles, what is written down and what has been true for long enough to show a trend. Assertions in an information memorandum are read as claims to be tested.
Sector specific issues
The four questions are the same across sectors. The evidence that answers them is not.
- Experiential and events. Project margins and their consistency, client deposits and how they are held, cancellation and postponement terms, seasonality and the proportion of repeat programmes. A business that shows strong revenue in one year on the back of a single large activation will be underwritten on the repeatable element.
- Performance and media. The split between pass-through media spend and fee, dependence on a small number of platforms, how commission and rebates are treated and whether fee is at risk if a client takes media in-house or a platform changes terms.
- Content and production. Ownership of work created by freelancers and contractors, usage rights, the proportion of project to retained revenue and whether the production capability is a differentiator or a cost centre.
- Influencer and creator. Talent contracts, exclusivity, the terms on which creators can leave, the concentration of revenue in a few names and the agency’s position between brand and creator.
- Marketing technology. The split between product revenue and services revenue, since buyers value them differently; code ownership; recurring contract terms; churn; and whether the technology is proprietary or assembled from third party components.
- Sport and culture. Rights and partnership contracts, their duration and renewal, dependence on a governing body or rights holder and the sensitivity of revenue to the calendar.
Artificial intelligence, through the evidence
Buyers now ask how AI affects the business, and they distinguish between claims and evidence. The questions are about the economics: how much of the agency’s revenue is for work that clients could automate or bring in-house, whether margins are improving as production costs fall or being competed away in lower prices, whether the agency owns tools, data or processes that a buyer could not replicate, and whether the team has changed how it works. A slide that says the agency is AI-first is a claim. A margin trend, a utilisation change, a pricing model that captures the value or a tool clients pay for is evidence. Buyers underwrite the second kind. AI, pricing and agency margins works through the economics and the evidence.
From issue to consequence
A finding has consequences proportionate to what it changes, and one finding can land in several places at once: sustainable earnings, the valuation, the buyer’s financing, the structure, the contractual protection, the timetable and the ability to complete. Sellers who understand where a finding is likely to land can shape the outcome by presenting evidence and a response before the buyer reaches its own conclusion.
| Issue | Evidence | Consequence | Seller’s response |
|---|---|---|---|
| One client is 40 per cent of gross profit | Contract term and notice, length of relationship, growth, who owns it | Valuation and structure: a lower multiple, part of the price moved into an earnout tied to that client, or a condition if the contract has a change of control clause | Show tenure and contract; propose a specific earnout on the client instead of a general discount |
| Founders hold the top relationships | Client ownership map, meeting attendance, second tier involvement | Structure (longer earnout, larger deferred) and the seller’s role | Demonstrate the handover already under way; agree a transition plan with milestones |
| Revenue recognised ahead of delivery | Invoice dates against delivery records; the deferred revenue balance at each year end | Sustainable earnings; a deferred revenue balance in the equity bridge; the buyer’s confidence in the rest of the numbers | Restate consistently across all years, with the policy written down, so the corrected trend is visible |
| Contractor created IP without assignment | Freelancer contracts | Protection (indemnity) and possibly a condition to completion | Obtain assignments before the process; disclose the few that cannot be obtained |
| Bespoke systems built by one developer | Code ownership, documentation, key person dependence | Integration burden and timetable; retention terms for the developer | Document the systems; put retention in place |
The levers are worth separating because the consequences are not automatic and not uniform. A change of control clause in a major contract is in the first instance a timing and protection issue: a consent to obtain, a condition, perhaps a retention. If the buyer judges the client likely to use it, the clause also affects the earnings the buyer is prepared to underwrite and, for a buyer borrowing against those earnings, the financing it can raise. A revenue recognition correction changes sustainable earnings and may leave a deferred revenue balance for the equity bridge; it can also change the multiple, if the buyer concludes that growth was slower than presented or that the information cannot be relied on. Knowing which levers a buyer may reach for, and why, makes the negotiation specific.
Motion’s view
In our experience, buyers withdraw less often because of a single finding than because of surprises, because a finding shows the information cannot be trusted, or because the seller’s reaction to a legitimate question suggests the relationship will be difficult. A finding that undermines the strategic case, or that cannot be remedied or allocated, can end a deal on its own. Present the issues first, with evidence and a response, and many of them become terms to negotiate.
What to do next
Run the four questions against your own business and write down the evidence you have and the evidence you lack. The gaps are the preparation plan, and preparing your agency for sale sets out the order to work in. If you are a buyer, the same questions are the starting point for planning an acquisition.
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Written by Rick Palmer and Rob Reid, founding partners of Motion Advisory Partners. General guidance, not advice on any specific business or transaction. Legal and tax points vary by jurisdiction and should be checked with appropriate advisors.