Act sooner rather than later - and fear sellers looking for quick exit: PR chiefs offer M&A insights

Leaders from across the communications industry offered insights and advice about mergers and acquisitions at an event hosted by PRWeek UK this morning (28 June).

PRWeek UK's latest breakfast briefing looked at sector M&A
PRWeek UK's latest breakfast briefing looked at sector M&A

The M&A Breakfast Briefing at Regent Street Cinema follows a flurry of high-profile deals in recent months, including consulting firm Accenture buying creative agency Karmarama - and its PR agency Kaper - in November; and global professional services firm Deloitte acquiring crises and reputation management consultancy Regester Larkin a month later.

Panelists, which included PR agency founders and bosses, offered the 60-strong audience their top tips and best pieces of advice on making an acquisition and successfully executing a merger.

The event was run under the Chatham House rule, which means PRWeek has not identified who said what. But some of the best insights have been summarised below:

1) People are your most important asset

One speaker said it was vital to retain the best staff after a sale, while another said that M&A "was all about incentivising people to stay", rather than worrying about how quickly they want to leave the business.

A third speaker said you have to ensure sellers aren't looking for an immediate exit after a deal is done. "If they are, something is wrong and you should consider walking away."

2) Strike a balance

Company culture was also a topic of discussion, with one panelist arguing that a merger would typically only succeed if the deal was "a good fit culturally" for both businesses. Another said it was important to find the right balance "between the human side and the commercial side of a deal".

3) Expect more major deals

Speakers agreed M&A activity would not slow down, particularly in the UK, which was described as a global centre of excellence for communications.

"This means it is likely other strategic consultants will look to buy comms agencies - but only in the UK. The US market is not as mature, so we are less likely to see M&A activity in that region over the next 12 months," one panellist said.

4) No M&A 'magic formula'

Speakers agreed there was no "magic formula" to successfully buying or selling a business, and added those thinking of doing a deal should expect a lot of hard work.

However, they were divided when asked why an M&A should be pursued. Several said it was best to look at the agency's revenue and fee income, while another said it was best to look at profit margin, underlying earnings (EBIT) - and the agency's reputation.

"They should be one of the top two in their field. If they aren't you have to consider if the business is worth buying," said one speaker.

5) Act quickly to avoid (potential) tax hikes

Money was another hot topic, particularly the amount a seller can make after capital gains tax is deducted from a deal.

The tax, currently 10 per cent for basic rate income taxpayers and 20 per cent for those on the higher rates, is calculated when profit is made on the sale of an asset, such as a PR agency. Capital gains set below £11,100 per year are currently tax-free. 

One speaker said: "If you are thinking of selling a business, you can bet that any government that is in power in five years' time will scrap the 10 per cent capital gains tax in favour of something higher. The higher threshold will also likely increase, so act sooner rather than later."

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