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Selling up to a bigger organisation

Selling up to a bigger organisation
Looking for a buyer for your business? Cast out a line and you never know what you might catch.

At the tender age of 43 Darryl McClay came to the conclusion he was too risk adverse to take the step from small boutique creative agency to becoming a larger agency capable of competing with the multitude of big agencies in the competitive world of advertising. Setting out in search of a suitor he initially trawled for minnows but ended up landing a whale.

Darryl McClayA good old fashioned recession will always help one to focus on business matters and viability. Especially if you happen to be in an industry, namely advertising, that is often perceived as a ‘nice to have’ service in times of trouble.
This situation, and having been owner of an ad agency known as Raydar Creative for nearly 18 years, made Darryl McClay stop and reassess what possibilities might exist on his business radar.

“Two years ago the market went through some major changes, the end game being that I knew the Raydar Creative ‘offer’ and structure would need to adapt to the new realities or risk going backwards. In the process of taking a cold hard look at my situation, I reached the conclusion that I’d have trouble taking the big step needed of growing the team beyond what I saw as a ‘safe’ figure of 10. The combination of both scenarios told me that it was time for a change.”

What that would entail, Darryl admits, was not something that he had contemplated before. He figured the process might help to uncover multiple possibilities so keeping an open mind was imperative. He started ‘project change’ by looking for other ‘kindred spirit’ smaller agencies. The plan being that he’d bring them all together—under the Raydar umbrella—to widen the offer and resource capacity and thus the ability to compete with the bigger agencies.

“I had a core team of highly talented and experienced staff and solid processess so I backed our ability to bring others into our business and to make it work.”

Having baited the hook, he suddenly had not just a series of smaller agencies on the line but one big one in the form of one of Australasia’s major communication and advertising giants The Clemenger Group.

Raydar had worked alongside Colenso (a Clemenger Group agency) on the Frucor Beverages account for many years and both agencies had a mutual respect for the other’s reputation and working capabilities. While he did think that at some stage in the future he wouuld explore the possibility of becoming part of a larger group it wasn’t in Darryl’s immediate plans for his business.

“There was an element of luck in terms if timing and the fact that I became known to the group while in the process of looking around for other smaller agencies. I’m a big believer that if you stay focused and work hard that, in time, great opportunities will present themselves. That turned out to be the case. They had another agency in Alphabet Soup operating in a similar space. The thought was the two might combine.”

With intentions on both sides now clear, the ‘business’ part of the equation kicked in and those with the expertise investigated ways to structure the deal.

Enter accounting firm Hayes Knight’s Matt Bellingham who, says Darryl, was a key part of keeping the prospect on the line.

“I knew Matt had expertise in the area as we had discussed the process years earlier. Matt took the time to get a full understanding of me, my business and our industry. He asked the right questions and had clarity on the issues that were most important to me when it came to the discussions with The Clemenger Group.”

“I was genuinely happy with the outcome as while two companies will rarely agree on every issue Matt made sure that the key things I wanted were included. He negotiated clauses that benefitted me when I hit my targets and removed some risk for the purchaser. At the end of the process both parties were in accord and we were told that it was one of the best run and smoothest acquisitions they had made in recent times.”

In January 2010 ink was applied to contracts and the acquisition was complete. Remaining involved with Raydar had always been on Darryl’s wish list. The fact the new owners wanted him to remain in the ‘mix’ only made the deal sweeter.

“At 45 I would like to think I’m just starting to hit my straps as a businessman and leader and I know that I still have plenty to learn. Keeping a minority shareholding was very important to me and the powers that be supported and facilitated this.”

One issue that was identified as a possible challenge was the transition from ‘sole owner’ to ‘minority owner’ and how
that might affect Darryl’s style and continuing ‘love’ for the business.

“People around me asked this question a number of times to make sure I was being realistic about the changes. The way the group works does allow me the autonomy I like on a day to day basis. The key difference is that we have a more structured approach to the business planning strategies and the big decisions. I appreciate having such experienced people working with me at a board level within The Clemenger Group and I see the benefit of that for growing the business. On some levels it’s actually a relief to have others share the load and add their perspective. I think I’ve adjusted pretty well given that it’s been 18 years since I last had a boss.”

Looking back at what has been achieved is positive for Darryl and in many ways the best of all possible worlds. His financial situation is more secure, he gets to go to Raydar each day, and his horizons have been broadened by being part of such a sizeable group. Moreover, key things like culture and the Raydar ‘vibe’ remain intact.

“I’m proud that we have carried the company culture and values through. This was really important to me and I wasn’t sure that it would be achievable given that my team has more than doubled in size.”

“Being part of a world class communications group has broadened my learning capacity and opened up access to resources from around the world that I simply could not get my hands on as a small independent agency. Ultimately our clients benefit from that which is great. I’m even more aware of the need to continue to move forward and to evolve our offering. I have a bigger ship now and this presents plenty of challenges. It also presents bigger opportunities that excite me and keep me focused.”

Raydar: With clients ranging from Frucor Beverages, Kellogg’s, Heinz Wattie’s, KFC, Pizza Hut, Mercedes Benz, Pacific Blue, The Laminex Group... and the list goes on... Raydar is a mid-size agency with big credentials. Post purchase by The Clemenger Group, and having been merged with Alphabet Soup, the Auckland-based communication agency is poised for growth and expansion.

Succession strategy: Cast out a line and you never know what you might catch. Make sure you have sound advisers to help you land the entity that takes your bait and comes on board.

What you need to have on the radar when looking at changing your business structure and mix.

Get an expert involved as early as possible. That person should have a strong track record and ideally specialise in company acquisition, sales, negotiations and mergers.

Have a plan and options available so when a suitable opportunity comes your way you are part of the way there.

Have clarity around what you want while remaining open to opportunities.

Explore each option based on its own merits and don’t be afraid to invest time and money in opportunities that look promising in a way that you may have not considered before. Business owners take risks every day, consider this a calculated financial risk that you have the opportunity to pull out of should you consider it unsuitable. But make sure you have a cold, hard look first.

Understand that you will have to give up some things but at the same time look at the positives, the things you will gain.

Once the opportunity is on the table, and you have had the right advice, revisit what it is that you want from it again.

Listen to your intuition and gut feeling.

Take time to select the “right” partner.

This story originally appeared in Succeed.