What Private Equity Should Know About Creative Agencies

Creative agencies have been under pressure for as long as they’ve existed. But the last decade has seen a sharp increase in that pressure. From nimble start-ups and flexible independents, to the overlapping of services between PR, advertising, media, and digital agencies, to management consulting firms getting into the game, to clients demanding more for less, creative agencies find themselves in dire need of reimagining who they are and what they do.

And now Private Equity (PE) has jumped into the muddy, murky waters, making things even more complicated.  PE firms have been buying up an array of agencies and product companies, rolling them up into a one-stop service stack and providing everything a Brand Director could need under one roof. It’s a compelling story. But does it work?

The Pitfalls of Private Equity Roll-Up

On paper it looks amazing — an example of the whole being greater than the sum of its parts.. Pulling it off, however, is something altogether more challenging.

The most prominent roll-up examples have had their fair share of merger and growing pains. Having an operational advisor on a creative agency board is like having a referee at a toddler soccer game.There is so much experimentation and messiness on the path to compelling creative, and creative agencies thrive in a culture of unfiltered, unfettered ideation. It’s interesting, then, to see business strategy clash with creative organizations. Many have tried to harness the power of creativity. Many have failed. Still, it’s possible if you know the potential pitfalls and how to avoid them.  

Let’s explore some of those pitfalls (which is by no means an exhaustive list):

  1. Creative agencies are different: Coming up with a concept that moves its audience to act isn’t a straightforward business practice you can SOP and lock-in like a manufacturing process or accounting strategy. It takes highly specialized talent, nuanced leadership, and a safe environment for creativity to thrive.
  2. Integration: Integrating two creative organizations is a task that takes deft leadership across functional leaders. Having functional leaders who can effectively integrate teams or work collaboratively across teams while being aware of culture differences is important in unlocking the potential of a roll-up or merger.
  3. Strategic talent plan: Creative talent and the folks that help inform and enable that talent are the only thing an agency can lean on. Getting the right butts in seats, understanding each functional lead’s alignment with the mission, knowing the team’s career paths and aspirations, and identifying redundancies and gaps where hiring needs to happen are core components of a solid strategic talent plan.
  4. How clients buy: Clients don’t always want a one-stop solution. They often want the best fit for each of the service categories. Rolling-up rockstar agencies across the entire service spectrum is tough. You are bound to land mediocre pieces of the equation. How do you bring up the level at all those shops? Especially when brand leaders continue to want to hire the best-fit vendor vs. the curated one-stop solution.
  5. Selling the whole: Selling the full spectrum of services of the rolled-up newco is often a completely foreign skill set for the founders and leaders of the acquired agencies. The larger organization works at a different level of procurement. Getting the right business development approach and people in place is critical to selling all a newco has to offer.
  6. Making the right deals: Founder and service fit seem to be the key ingredients to a successful acquisition strategy. If a founder can seamlessly work with the rolled-up team the likelihood of a successful merger is great. Service offering mergers that are synergistic are more likely to have a market impact. This is basic stuff, but important to a successful deal — and often easier said than done.

Founders, what would you do if PE comes calling? Give me a call. I would love to discuss that scenario with you.

[email protected]

218-590-4448

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Photo by charlesdeluvio on Unsplash  

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Ciera is a born-and-raised Duluthian who recently graduated from Point Park University in Pittsburgh. When she isn’t designing the Salmela website or sending emails, she doubles as an actress! With over 15 years of acting experience, Ciera brings her creative artistry and understanding of people to her work at Salmela.

Madison is a marketing maven with a mastery of magnificent messaging. She brightens every room with her positive attitude and joins Salmela to explore the digital corners on every search. If you’re having a first conversation with one of us, Madison is probably the reason why!

Ryan is an Emmy-award winning news producer with a strong history in the performing arts. Funny and outgoing, he’ll meet you with a journalist’s curiosity and actor’s joie de vivre.

Meghan brings her previous advertising agency experience to Salmela. She is a natural-born conversationalist and delights in every interaction with candidates and clients alike. Meghan can find something in common or a shared interest with just about anyone. (No really, it’s AMAZING.) She is also a foodie, loves cooking, and is always looking for the next opportunity to try an adventurous recipe.

Kate joins Salmela after a decade of non-profit arts leadership, where she shared her passion for building community, education, inclusiveness, and arts access. Her superpower is helping professionals identify their strengths and set them on a course for greater success. After work, she can be found reading Shakespeare, doing yoga, or prepping the next generation of theatre stars for college.

Cory spends his day advising senior leaders on talent acquisition strategy. He is happiest on his bike, skis, or helping his daughters rehearse lines. He began his career as a National Team Coach for the U.S. Ski Biathlon Team, followed by experience in pharma sales. In 2005, he founded Salmela. Today, Salmela places leaders across the healthcare industry. Salmela is the go-to vendor across marcomm disciplines in healthcare and beyond.

Chief Financial Officer, Olympian, and Health Coach, what can’t she do? When Kara is not managing the Salmela Financials, she spends her days educating and supporting people as a health coach. If that wasn’t cool enough, she also competed as an American biathlete at the 1998 and 2002 Winter Olympics.

Megan focuses on individual career wellness and team development for the healthcare advertising industry. As a natural networker, and with a career background in health/wellness and international corporate project management, Megan has the experience necessary to understand your needs. She enjoys being outside with her family, volunteering in the community, trail running and practicing yoga.

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