If you’re an agency owner thinking about your exit strategy, you’ve probably envisioned selling your agency for a life-changing amount. But what if your EBITDA and other financials don’t support a high-multiple sale? Or what if you don’t want to go through years of restructuring and growth to make your agency more attractive to financially-minded buyers? That’s where an acqui-hire comes in.
With an acqui-hire, you’re not selling your agency in the traditional sense. Instead, you’re “selling” your reputation, book of business, and team. And the acquiring company is hiring you as an executive-level employee. This comes with pros and cons.
As for any big decision, consider these key questions: what’s your ideal outcome, what’s your minimum acceptable outcome, and what worst-case scenario do you want to avoid?
Acqui-hires are rarely a first-choice exit strategy—but for many agency owners, it’s the most practical way to cash out. This article will help you determine whether an acqui-hire is right for you and how to start navigating the process successfully.
1. What’s an acqui-hire exit?
An acqui-hire is a relatively small exit where the owners and their team go to work for the acquiring firm. The term is a portmanteau of “acquisition” + “hire.”
It will look and sound like a merger or acquisition to the public and other outsiders. The press release will say, “Firm ABC acquired agency XYZ.”
The difference is behind the scenes. Compared to a traditional exit, the outgoing owner receives a relatively modest payment from the acquirer. In my experience, acqui-hire payments rarely exceed $1 million. Smaller acqui-hires might involve payments of $500,000 or less.
The outgoing owner gets cash and a higher salary (plus keeping any excess cash from their former business). They usually negotiate a higher-paying job that’s closer to their liking. Sometimes, they might negotiate modest equity in the new firm if they see growth potential and are willing to give up some initial cash.
Acqui-hires are generally not the multi-million dollar exits that most agency owners envision. They likely won’t pay enough for you to retire permanently. But they might be the only viable option for a particular agency at a particular time.
2. When an acqui-hire might be the right move for your agency
Exiting via an acqui-hire makes sense when:
- You’re burned out on running an agency. You still love the work but are tired of managing people, chasing new business, and handling operations.
- You don’t want to overhaul your agency for a bigger exit. Scaling for a high-multiple sale could take years, and you don’t have the energy or desire to do it.
- You lack a strong succession plan. If no one internally can take over, an acqui-hire allows you to transition out without shutting everything down.
- Your agency has niche expertise. If your team has specialized skills in a high-demand area, an acquirer might see more value in bringing everyone in as a unit.
- Your biggest asset is your client relationships. If you have strong client relationships but lack proprietary technology or recurring revenue, an acqui-hire might be the most viable option.
- You have marquee “big logo” clients. Some acquirers will like adding those logos to their client portfolio, especially if they want to move into a new industry.
The alternative is seeking a financial buyer. They’ll likely be picky:
- They’ll be interested in adjusted EBITDA since they’re effectively buying a future stream of profits.
- If your revenue is in the six figures, acquirers would rather do due diligence on an agency where EBITDA alone is in the high six figures. Others wouldn’t be interested unless your EBITDA is $1 million or $5 million, which means you’re running an agency with $5 million or $25 million in revenue.
- If you’re strongly considering an acqui-hire, that can be a sign (for you) that your agency isn’t currently attractive to a large financially-focused buyer.
In contrast, a medium-sized agency might be quite happy to acqui-hire your smaller agency. Imagine the medium-sized agency is growing fast and they need to staff up:
- They might not have the cash (or appetite for debt) to spend $5 million or $10 million to buy an agency. But they might be quicker to invest $500,000 to add a great team and some promising clients.
- If you put yourself in the acquirer’s shoes, they get to add a tight-knit team in a single move. That’s especially true if your team has unusual skillsets that are hard to hire without paying recruiting fees.
Acqui-hire Anecdote: Loving not being the boss anymore
Jennifer ran her agency for over a decade and was exhausted from wearing all the hats. After an acqui-hire, she took on a leadership role in the acquiring agency and discovered she enjoyed not having to handle payroll, HR, and constant business development.
The contract required her to stay for two years to receive the full purchase amount, but she stayed for five years. Why? She was making more money and feeling less stressed. She also liked her new boss, who gave her a lot of autonomy in running the business.
This outcome was unusually positive. Most sellers don’t stay longer than the contract—and some leave early if they clash with their new boss.
3. Should you hire an M&A advisor for an acqui-hire?
When you’re on the acqui-hire track, you likely won’t hire a commission-based M&A advisor to conduct a full sell-side search—because traditional acquirers won’t like your financials. However, I recommend hiring an M&A specialist to provide narrower-scope advice.
- Punctuation offers a flat-fee M&A advisor service ($20,000) to guide you if you’ve already identified an external or internal buyer. They also have an offer review service ($5,000), which they’ll credit toward the expanded service.
- TobinLeff specializes in full-scope agency M&A—but they’ll sometimes work with sellers on a narrower basis. They also offer a market value analysis, which includes a valuation. (Disclosure: I have a referral agreement with TobinLeff.)
Your lawyer, CPA, and business coach will also be involved. Since you’ll sell your agency just once, it’s worth getting advice from people who put your interests first.
Speaking of that, clarify confidentiality and conflicts of interest—especially if you’re talking to someone who hasn’t signed an NDA that puts you first. If you’re talking to the buyer’s advisor, assume that anything you say will get relayed to the buyer.
4. Key considerations before pursuing an acqui-hire exit
Before you start looking for an acquirer, ask yourself:
- What do you want? Are you looking for financial security, career stability, or creative freedom? Acqui-hires can give you day-to-day work that you enjoy. But the overall experience depends on how you and your future boss work together.
- Are you okay with becoming an employee again? Many founders struggle with this transition. You’re no longer the final decisionmaker, which can be good or bad.
- What’s your minimum acceptable outcome? Define your bottom-line salary, how long you’re willing to stay at the acquirer, earnout terms, future job role, golden parachute, and team retention expectations.
- How long are you willing to stay? The assumption is you’ll have to work at the new agency at least two years. But how long can you realistically commit? If you leave early, what happens to your earnout payments? If you are terminated early, what kind of golden parachute can you negotiate up front?
- How will this affect your personal identity? If you’ve been “the boss” for years, shifting to an employee mindset can be tough. Before you exit, reflect on life after selling your agency.
Acqui-hire Anecdote: Being “meh” on the new boss
Eric didn’t love or hate his new role; it just felt like a job. It reminded him of earlier in his career—but now he was more senior instead of a front-line individual contributor. He missed some aspects of running his own agency, but he liked the steady paycheck.
Eric negotiated a deal that doesn’t require him to stay to get the earnout, so he could theoretically leave at any time. However, he likes having the salary and health insurance. The new role isn’t quite what the acquirer promised, but he’s not in a hurry to leave.
5. Vetting the acquirer: Your new employer and your new boss
You’re not just selling your agency—you’re taking a new job. When you talk with the acquirer, think of them as a financial partner (in buying your agency) and as a boss (because you’ll be working for them).
Ask yourself:
- Can you see yourself working for this person? Are they someone you respect, or will you constantly butt heads? What’s their management style? Do they have a clear idea of your role do they seem to leave it as “TBD”?
- What’s the company culture like? Will you and your team thrive in this environment? For instance, is the agency marketing-driven or sales-driven? If there are multiple owners, how do they get along? What behaviors are rewarded versus punished? It may not be a match for everyone, but it’s ideally comparable.
- Is the company financially stable? Your deal (and future job) could be at risk if they’re struggling. The acquirer may be reluctant to share full financials, but they should understand that it’s reasonable for you to see what’s going on. You’re different from a job applicant who’s applying to several companies.
- How do they treat their employees? Unhappy employees and high turnover are red flags. Read the Glassdoor reviews. As you know, those tend to skew negative. But consider the patterns. And ask if trusted contacts know what it’s like at the agency.
- Are they transparent about expectations? If they’re vague about your role or the agency’s future, that’s a problem. Even if you aren’t getting equity in the new company, they should recognize you’re making a life-changing decision.
Acqui-hire Anecdote: Hating your new boss
Lauren thought the acqui-hire would be a great fit—until she realized her new boss was a closed-minded micromanager. She missed being in charge and regretted not vetting her acquirer more closely.
She particularly regretted giving up her autonomy. A year later, she resigned, losing part of the earnout. It cost her six figures, but the peace of mind was worth it. She’s now self-employed as she considers her next move.
6. Finding and approaching potential acquirers
There isn’t a database of acqui-hire buyers. You can ask M&A advisors—and agency advisors like me—if they have a client who’d be interested in buying your firm. You might get some interest, but they don’t work for you. It’s like a job seeker reaching out to a contingent recruiter—the recruiter isn’t going to help right now unless they have a matching job requisition to fill.
As a result, you’re mostly on your own. But here are some places to look:
- Existing or past clients: What companies already love your work? Have your biggest clients talked about staffing up? Maybe they’d like to add some or all of your team to their team. The same might apply if a past client is on a hiring spree.
- Partner agencies: Would a past or current collaborator be a match to acquire your team? You might not know everything behind the scenes, but you already have a business relationship and are familiar with each other’s culture.
- Industry connections: Now’s a good time to download your LinkedIn contacts to see if someone’s in a role to acqui-hire your agency or to know someone who knows someone. Of course, you’ll need to be careful about whom you tell.
Making an approach tends to work best if the buyer brings it up first—for instance if a major client or partner agency asks if you’d ever consider joining them. This gives you more negotiating power than if you contact them first.
But eventually—if an acquirer hasn’t come to you, you’ll need to make the first move.
7. Negotiating the best acqui-hire terms
In M&A, the joke is that you get either the price you want or the terms you want—not both. Your results will depend on your negotiating position.
Here are points to consider if you don’t hire an M&A advisor directly. Most of these apply in any agency exit—but it’s more complicated when the acquirer doesn’t expect you to ramp down and be gone within a couple of years.
- Typical deal structure: Often, 50% is paid upfront (in Session 1 of my exit-prep training, Jonathan Baker notes a range of 25-75%), with the remainder (the “earnout”) tied to performance over time.
- Earnout criteria: What impacts the amount of future payments? You want automatic payments, but the buyer wants to make them contingent on revenue, profit margins, and client retention.
- Payment timeline: The buyer usually wants to spread payments out over time, while the seller wants to be paid as soon as possible.
- Employee retention: Will your entire team move over, or will some be left behind? This can be a good opportunity to part ways with Wet Twine, but it’s usually a sign that you shouldn’t wait for an exit. Instead, terminate (or counsel out) the employee in the next month or two.
- Cultural fit: Since you’ll be working there, ensure it’s a company where you want to stay.
- Working capital: How much cash will you bring into the merged business to cover immediate expenses like current payroll? In an acqui-hire, you might not need to commit as much working capital as a traditional exit (since the acquirer isn’t taking over a lease or other business operations). But your negotiations impact whether you walk away with most, all, or none of the cash in your current business—and that’s on top of the exit valuation.
- Location and travel expectations: Will you need to move? If you aren’t moving, will you need to commute occasionally to the new headquarters? Does your new role require more or less travel than you do now?
- Equity in the acquiring firm: Do you get any equity in the acquiring firm or a holding company? Acqui-hires usually don’t include equity. But if the acquirer is doing a “rollup” strategy to build a bigger agency to sell in the future, you might want equity. I wouldn’t take an all-equity deal—there’s too much downside risk—but you might consider giving up some cash if you’re confident the equity will be worth more in the future.
- Noncompete agreement: The acquirer will want you to give up the right to start a competing agency for some period of time. They may also restrict you from working for a competitor. Talk to a lawyer. It’s harder for companies to enforce noncompetes with employees, but sellers are a different category. If things don’t work out with your acqui-hirer, you don’t want to find yourself banned from your livelihood for a year or more.
- Add a sabbatical: Unlike many traditional exits, you still need to work after the deal closes. Try to negotiate taking a sabbatical to take place soon after the acqui-hire transaction. You’ll likely be exhausted and need some time to recharge.
This isn’t a stock sale; the acquirer isn’t buying your corporate entity. That means you’re still on the hook to resolve any liabilities your current agency incurred. (But it also means you can keep excess cash in the current business, subject to your negotiations about working capital.)
That also means you must determine whether client contracts are “transferrable” to the new agency. Talk to your lawyer. Even if your MSA doesn’t include a transferability clause, some clients may be glad to move over if it means they keep working with you and your team.
8. Communicating the acqui-hire to your team, clients, and the industry
Plan on several layers of communication. You’ll tell your business advisors first (or perhaps your second-in-command), and then the rest of your employees, and then clients, and then the broader community.
Why that order of operations? It allows you to work out the details of your language through gradually larger audiences, in case you discover something that impacts the terms or timing of the deal.
Remember that you’ll need to coordinate with the buyer on what to say since you’re no longer fully in charge. Now, let’s look at communications with each stakeholder group.
Communicate to your team:
Be transparent but strategic. Look for ways to frame this as a growth opportunity for your team, but don’t promise things you can’t guarantee. It’s better to say, “I’m not sure,” or “I’ll get back to you” than to commit to something out of your control.
If applicable, acknowledge that not everyone will make the transition. Help those who aren’t joining find new roles. It’s the right thing to do, and people will remember this for a long time.
Want more advice on telling your team? I have a future article coming out later this month about how to tell your team you’re selling. Subscribe to my newsletter to get notified.
Communicate to your clients:
Frame the change as an acquisition because that’s how outsiders will see it. But focus more on them than you. Clients want to know, “What’s in it for me?” (WIIFM).
Reassure clients about continuity. Check contract transferability first to see how to navigate those conversations. Even if the contracts are transferable to the new firm, a poor transition process can make clients less likely to renew in the future, which can hurt your earnout.
Introduce clients to the acquiring company and their leadership. Odds are good that they’ll continue working with you and your current team, but they’ll want to meet your new boss(es). You may need to refer some of their questions to the acquirer.
Communicate to the broader industry:
Consider how this affects your reputation and personal brand. Seek to control the narrative. Even if an acqui-hire wasn’t your preferred exit, this is a new opportunity—not a failure.
Your joint press release will describe it as an acquisition, not an acqui-hire. The usual approach is for the press release to announce the merger (or acquisition), with quotes from you and the acquiring CEO talking about your excitement about the combination. The press release usually mentions your new title and how clients will benefit. Acquisition press releases are fairly templated; generative AI can help.
9. Common pitfalls to avoid in an acqui-hire exit
Watch out for these mistakes in agency acqui-hire exits:
- Lack of due diligence: The acquirer will vet you and your agency. Don’t rush into a deal without thoroughly vetting the acquirer, too.
- Unclear expectations: Define job roles, compensation, and transition periods up front. You don’t want to find that you actually took a pay cut or that the acquirer’s bonus formula is stacked against you.
- Losing control over the deal: If the acquirer knows you’re desperate, they’ll negotiate aggressively. You might not love your alternatives, but selling to that particular acquirer likely isn’t your only option.
- Underestimating the culture shift: If you’ve been the boss for years, being an employee again can be a tough adjustment. And this impacts your current team, too. Even if they still report to you, you won’t have the same autonomy as before.
10. Final thoughts: Is an acqui-hire exit right for you?
If you’re looking for a life-changing buyout, an acqui-hire exit likely isn’t your first choice. You wouldn’t be able to fully retire or start a new business following a short break. However, an acqui-hire might be the best option to help you move on to your next chapter.
Start planting the seeds now. That includes getting help reaching your goals. Want to see what it would take to scale your unique agency?
- You’d benefit from my Agency Growth Diagnostic. You’ll get my “reality check” advice within 4-6 weeks of kickoff. You might decide to pursue an exit… or wait to see if you can get a better deal.
- Aren’t ready to commit five figures for help? Get on-demand tips about selling your agency via my Control (and Maximize) Your Agency Exit training. You’ll get perspective from agency sellers, buyers, M&A advisors, and more—including my advice on how to grow your valuation to give you more exit options.
Question: Based on your circumstances, would you pursue an acqui-hire exit?
