M&A-spawned client losses can open other doors

It's a tech PR Catch-22: A privately owned startup hires an agency to position it for acquisition.

It's a tech PR Catch-22: A privately owned startup hires an agency to position it for acquisition.

But when acquisition occurs, it is often the end of the agency's work on the account.

"In the economy we're in, it's just an M&A period," says Sabrina Horn, president and CEO of the Horn Group. As an "insurance policy" of sorts, she adds, agencies - especially small and midsize - have to "protect themselves so that they're not exposed and suffer when [an account] does go away."

That means planning ahead, Horn says, by collecting as much information as possible, anticipating industry trends, and adding more new business.

"We estimate that $2 billion worth of M&A activity on our roster in the past four years has cost us hundreds of thousands of dollars in agency revenue," says Todd Defren, Shift Communications principal. "The only 'win' for any firm in such a situation - assuming that stock was not part of the ongoing compensation - is to have yet another agency case study for prospective clients as to our ability to create recognized market value."

A client's acquisition can definitely be a selling point for other startups looking to get their names known in the marketplace and to attract buyers, agrees Mark Coker, founder and CEO of Dovetail Public Relations.

Plus, "our industry is populated by serial entrepreneurs," he says.

And when an acquired-client CEO hands off a company and leaves to found a new venture, "if you've served them well, they'll come back to you," Coker adds.
Still, he notes there's not much a firm can do to prepare if a client leaves following an acquisition.

"We keep an eye on the clients we have and keep some diversification in there," he explains. "There's not too much additional planning you can do beyond that. We just try to operate our agency as efficiency as possible."

In positioning clients for acquisition, "a nice, positive outcome for them can be a bittersweet outcome for us," admits Phil Greenough, founder and CEO of Greenough Communications.

But the transition period can present new opportunities, he explains, even beyond traditional PR efforts.

When Greenough client Connected, a storage software maker, was acquired by Iron Mountain (IM), for example, the firm's core PR services were no longer needed. However, IM was interested in some of its other services, including its social media expertise and a customer harvesting program, both of which were incorporated into its overall marketing mix.

That was the acquisition's "silver lining," Greenough says. "It shows where we can help a [larger company] reach goals with different services that they haven't even thought about."

Ultimately, losing clients to M&A is the nature of the tech PR business, says Mike Neumeier, principal at the Arketi Group. But then, client shifts in general are the nature of the business. Whether an agency is working with a VC-funded startup or a well-known brand, "18 months from now, you could be kicked out on the curb," Neumeier says. "Firms always have to be [aggressively] producing and generating results."

Similarly, agency management has "to be able to look up and say, 'What happens if we lose 10%, 20%, or 30% of our business tomorrow?'" he adds. "Any good consultant will tell you, don't have all your eggs in one basket."

Key points:

When a startup company is acquired, its PR account will often go, as well

Agencies can use acquisitions as a selling point for other startups looking to attract buyers

Successful M&A activity can open the doors to new opportunities, beyond core PR programs

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