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6 Things To Know Before (And After) You Sell Your Creative Business

Considering selling your creative shop? Finding your dream buyer is only the start. One formerly independent agency owner walks us through lessons learned before, during, and after the courtship and negotiation.

A year ago, Michael Ferdman, Founder & CEO of New York based digital agency, Firstborn, sold his company to the Dentsu Network, a subsidiary of global giant, Dentsu Inc. So far, by all available measurements, the relationship has proved fruitful–the shop reports a 35% increase in revenues and a roster of clients including Sony, Pepsi, Wrigley, and Google. But selling a company is always a fraught proposition–before and after the deal closes. Here, Ferdman shares insights on what he learned about negotiations in the acquisition process, what others considering a sale should look out for and forward to, and how to best maintain the soul of your business when you’ve been acquired.

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One year ago I completed the sale of my then 13-year-old baby, Firstborn; a small-but-thriving digital agency that made both money and top-notch creative work every year since opening our doors in 1998. Of course, they wouldn’t call it The Great Unknown if you walked in actually knew what to worry about. Only now, with the benefit of hindsight, can I see what anxieties were a waste of time and which were truly worth my attention. One year into a healthy, happy, and prosperous acquisition, these are some of the lessons I’ve learned about being courted, making the right decisions, and continuing on with business as usual…

1. Ask not what you want from your buyer, but what your buyer wants from you.

As a business owner on the verge of selling, you’ve probably had plenty of time to picture your ideal buyer. What you might not have thought about is what the buyer is looking for–and how that will affect your business. Look at the other companies your potential acquirer has bought. Are they thriving? Is their product different from–or even worse, inferior to–what it was before? Has their culture undergone a radical transformation? When I looked at the companies previously acquired by my suitor, I saw healthy, creative shops producing work I would have been proud to put my name on. The economy is fragile; technology moves quickly; consumers change daily. The only thing you can control is what you bring to the table and what you believe in. Make sure your acquirer believes in the same thing.

2. The devil is in the deal making. Arm yourself.
Building a company is very different from selling one, so surround yourself with people whose skills supplement yours. In my case that meant a great accountant and a great attorney with access to specialists (a tax lawyer, for example). Having an objective view of your own situation is vital, so educate yourself and hire an outside advisor. It should go without saying, if you’re thinking about selling, make sure your books and your numbers are tight. There is no such thing as a pleasant surprise when it surfaces in the due diligence phase of your acquisition process.

Remember, much can be learned in the negotiation process. If you find yourself clashing with a suitor at the negotiating table, odds are you will clash after the deal is done. Decide what you want and lay it on the table. If you don’t see eye to eye with the person across the table it’s probably best to go your separate ways.

3. Don’t let negotiations drag on.
Getting acquired is a lot like getting hitched, it’s easy to let the wedding overshadow the marriage. Don’t let negotiating become your full-time job. It’s hard not to get emotional during the negotiation process–after all, this is your baby you’re (possibly) selling. The faster a decision gets made, the less likely you are to let that happen. Set strong parameters and then move quickly toward the finish line. And don’t get lulled into a false sense of security because you sense things are wrapping up. No deal is done until the papers are signed. (And by “papers” I do not mean a letter of intent–that’s just the start.) Encouraging words are nice, but plenty of deals fall apart at the last minute. Focus on closing till the ink has been spilled.

4. Never make a deal for the pipeline.
The biggest misconception about being acquired is that the moment you sign a deal opportunities will come flying at you. It’s one of the foremost fantasies of every small-business owner, and one of the greatest falsehoods. Yes, following the right acquisition, you should have opportunities to do business on a grander, greater scale than before. Otherwise, what’s the point? But that change is not instantaneous, and focusing on business you don’t yet have is the surest way to lose sight of the business you do.

5. You are not your first year out.
Never look back on the first year after a buyout as defining what you have become as a company. Have a vision for where you want to be a couple of years out, put it in your head, then put your head down and get back to business. Many deals have an earn-out, and one idea might be to request an extra year on the deal so there is not enormous pressure on the first year. There is enough going on and the focus of chasing a number can potentially do damage.

6. Keep your culture. Take care of your people.
Always be deliberate when it comes to decisions based around your people and your company. Continue to embrace the traditions your company has always kept and don’t let them change. Keep your business healthy and your people happy; both of which are more easily accomplished with the right leadership in place. Give those leadership positions to people who have been with you for years, who know your employees and the vision of your company. These people will ensure that your culture survives and your business continues to thrive, well beyond your own time at the helm. Remember, your culture and your people are the very soul of your company. And that’s not something anyone can put a price on.

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