The recent demise of M+C Saatchi’s Australia and New Zealand buyout has put PE at the front of a lot of agency owners’ minds. It’s an understandable reflex, write Sangeeta and Will Leach, owners of The Leach Partnership.
The HoldCo’s have changed strategy in recent years, moving away from the small-and-often acquisitions that once built out their stable of brands, toward fewer, larger deals that give them leverage with global clients. That’s not a dead end for independent agencies, but it’s a narrower door than it used to be.
So it’s natural to go looking for another way to realise the value you’ve built.
But despite the headline numbers PE firms are said to have earmarked for Australia, very few agency deals have actually completed, and fewer still among creative agencies. Before anyone gets fixed on PE as the answer, it’s worth widening the lens.
The alternatives include leveraging the success you already have, a merger, an acquisition, grooming a successor, or making yourself genuinely difficult for a HoldCo or consultancy to ignore, whether that’s through taking share from adjacent categories or building IP no one else has.
Any advisor working with owner-managed firms should be putting all of these on the table before backing one horse.
That said, if PE is the horse you want to back, it’s worth understanding exactly what you’re signing up to find out about your own business.
Understand what PE is actually buying
A PE purchaser wants a five-year exit, ideally having doubled the profit of the business they bought. That’s the whole game. Before you take a single call, ask yourself honestly whether you can see that path, and whether you could even start to sketch it out loud. What are the indicators of future performance, as distinct from a strong recent year? Do you genuinely understand your differentiation and your ability to charge a premium for it going forward, or is your value story mostly a description of what you’ve already done?
If those answers hold up, then ask the harder question the M+C Saatchi case leaves for everyone else in the market: would your business survive the process that just ended theirs?
Would it survive the due diligence microscope a growth partner like Parc puts a business under? That process audits how much of your value actually belongs to the company, and how much belongs to specific people, specific relationships, and habits that never made it onto paper.
Here’s what it looks for, and what to fix before someone comes knocking or you go looking for capital.
Money now and money tomorrow
Most agencies over-value themselves. We’re optimists. But remember a valuation is an estimate of future earnings – not past earnings. Also, for a PE buyer, the numbers are the truth – not the context around the numbers. Their first pass will be forensic and totally unemotional. Be prepared for them to seek to remove elements of expenditure from their valuation. Be prepared for a discussion around market salaries vs shareholder salaries and expenditure that is difficult to completely tie to return.
Client contracts and client relationships
At TLP we have a motto – ‘relationships equal reward’. Long term success of any business relies on brilliant relationships formed and tightly held. But a PE buyer does not invest based mainly on the warmth of a client relationship. They price the paper that survives a change of control – the contract. Contracts with short notice periods, no exclusivity, or informal renewal arrangements read as risk, no matter how long the client has been with you. If your best accounts are running on a handshake and a long history, that is a retention story for you and a valuation discount for a buyer. Fix the paper before you start the conversation, not during it.
Revenue concentration, honestly assessed
Most owners know their top clients as a percentage of revenue. Fewer have asked what happens to that number if the founder who holds the relationships left tomorrow. Or if the relationship resides primarily with one individual client-side. Concentration risk is not just about one client being too large. It is about how much of your revenue depends on one or two specific people rather than the institution around them. A buyer will find this number whether you present it or not. Better it comes from you, with a credible plan attached, than from their analyst three weeks into diligence.
Key-person risk, priced correctly
In a creative or strategy business, a meaningful share of the value in the room is one or two people. That is fine. It is also exactly what a financial buyer discounts hardest, because it does not survive a change of ownership by default. If your business cannot demonstrate that capability, client trust and new business capacity sit somewhere beyond the founders, expect that gap to show up directly in price, structure, or both. Building a genuine second tier of client-facing leadership before you go to market is worth more to your valuation than almost anything else on this list.
What discipline will cost you
Growth capital brings real benefits: an exit path without a trade sale, investment a founder’s own cash flow would never stretch to, and commercial discipline that plenty of owner-managed firms need whether they want it or not. It also brings governance built to protect the investor’s capital, and that governance does not distinguish well between waste and the kind of creative risk-taking that made the business worth buying in the first place. Before you sign anything, get specific about which decisions you are giving up, not in principle but in practice: pitch investment, staffing calls, pricing on strategic accounts. If you cannot answer that specifically, you have not read the term sheet closely enough yet.
The self-audit worth running first
Before any conversation with a PE firm or growth investor, run the exercise internally that they will run on you. If a buyer spent eight weeks inside this business, what would they find that is not in the deck? Which client contracts would not survive a change of control? Which revenue lines depend on one relationship rather than one brand? Is the forecast built on pipeline or on hope? Answer that honestly, fix what is fixable, and you walk into the real conversation already looking like the business you claimed to be, rather than hoping nobody checks.
Private capital is not a verdict on what you have built. It is a very thorough test of it. The agencies that come through that test well are the ones that ran it on themselves first.
