Press Release: TSG 2015 PR Agency Owner Survey

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SURVEY FINDS THAT ALMOST ALL INDEPENDENT PR AGENCY OWNERS
PLAN TO SELL THEIR FIRMS

Ninety-two per cent of independent PR agency owners plan to sell their firm at some point, and of the 92%, almost half plan to sell within the next 5 years, according to an industry wide survey conducted by The Stevens Group, which specializes in PR agency consulting and mergers and acquisitions.
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Thirty-six per cent of the respondents haven’t set a time frame to sell as yet.

When asked why an owner would wait to sell his or her firm, 60% of the respondents who expressed interest in eventually selling cited wanting to increase revenue before they begin the process of actively pursuing interest from a buyer.

Of those respondents interested in one day selling their firms, two reasons were virtually evenly cited as the dominant motivating factors for selling: 47% said to cash out; and 45% said to position their agency for future growth.

“These results came as something of a surprise to me,” Art Stevens, managing partner of The Stevens Group said.  “Had this survey been done 10 years ago, I would imagine the vast majority of respondents would have cited cashing out as their only reason for selling.  But, clearly much has changed in our profession over the past decade as competitive advantage, for both new business acquisition and for attracting top PR talent, has continued to favor consolidation.”

The age ranges of the survey respondents breaks down as follows: 37% are between the ages of 50 and 60; 29% between the ages of 40 and 50; 9% between the ages of 30 and 40. Approximately twenty-five per cent of the respondents are over the age of sixty.

Sixty-four per cent of the respondents want to keep working for the acquiring firm after their employment contract ends.  Thirty-six per cent don’t.

Forty-four per cent of the almost 100 principals who responded to the survey own PR firms that range in size from between $1 million and $5 million in revenues, in a broad mix of niches and geographic locations.  Right behind them at 40% are agencies below $1 million in revenues.  Thirteen per cent are between $5 million and $10 million.

In response to the question “how much longer do you want to work” 52% want to work for as long as ten more years while 27% want to work as long as they can.  Some 21% have no preconceived time table.

Another surprising finding is that almost a quarter of the PR agency owners responding own less than 100% of their agencies.

“This is another response I wouldn’t have expected.” Stevens said, “My take on this is that this dilution in equity is geared to retain key second line managers.  Owners of agencies in growth mode have come to the realization that buyers prefer firms with strong second tier management, regardless of how long the owner is willing to stay on.  Many agency owners have put together golden handcuffs to retain such managers by means of real stock, phantom stock and generous bonuses and incentives.  In today’s robust M&A marketplace, they realize that to position their firm for acquisition, they must hold on to their key second tier managers.”

Fifty-four per cent of PR agency owners feel that their next in line senior manager is ready to manage the firm in the event the owner is unable to, or chooses not to.  And 46% feel that is not the case.

Another question had to do with the average size of PR agency clients.  Three quarters of the agencies reporting have at least one client that accounts for as much as 10% of total revenues. The largest client of thirty-seven per cent of the agency owners responding accounts for between 10% and 20% of total revenues.  Thirty-seven per cent have a client that accounts for between 20% and 30% of total revenues.  And 13% of the agencies responding have clients that represent between 30% and 50% of their total revenues.

“The rule of thumb in the PR agency industry,” Stevens explained, “is that no one single client should represent more than 20% of total revenues.  Anything exceeding that number is troublesome.”

Art Stevens has helped facilitate PR agency mergers and acquisitions for the past ten years.  He was a founder and CEO of LobsenzStevens, a PR agency which once ranked among the top twenty-five independent firms in the country.  His firm was acquired by Publicis.

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