[Guide] How to acquire another agency

Are you considering acquiring another agency? Whether you want to grow quickly, diversify your service offerings, or enter a new market, buying an agency can help you achieve your goals faster than organic growth alone. But as with any significant business decision, there are risks. The key is to approach acquisitions strategically and methodically.

Several agency owners have asked me to share advice on acquiring another agency. This can be a good way to grow revenue by accessing clients and skillsets you don’t currently have. However, it can also go poorly and waste your time and money. Be willing to walk away, and prepare for inevitable integration challenges.

How can you get better results if you want to acquire another agency? Read on for a thorough (but not exhaustive) guide about points to consider! Pour yourself a beverage; this is 3,500+ words.

1. Clarify Your Acquisition Strategy

Before reaching out to potential targets, take a step back and ask yourself: Why do I want to acquire another agency?

Your goals will determine your approach. Are you looking to:

• Expand your client base? Acquiring an agency with complementary clients can help you grow revenue without starting from scratch. This includes adding client “logos” overnight.
• Add new services or capabilities? For example, if your agency specializes in web design, buying an SEO-focused agency could round out your offerings, including giving you access to retainer-based recurring revenue.
• Enter a new market? Acquiring an agency with a strong local presence can help you establish a foothold in a region where you currently have little reach. This is especially helpful—albeit complicated—if you’re expanding to a new country.
• Recruit top talent? You can add a new team or several teams of people who already know and [hopefully] trust each other. This includes full-scale acquisitions, as well as the “acqui-hire” option.

This drives whether you’re doing a self-funded acquisition (e.g., an acqui-hire that might require just $500K down) versus something that requires a bank loan (e.g., an SBA 7(a) loan for up to $5 million) or something that requires institutional financing (which is beyond the scope of this article).

Also, read my advice on receiving unsolicited acquisition offers. It will help you imagine yourself in their shoes.

Define your criteria and get additional guidance

Once you’ve clarified your goals, define your criteria for potential targets. Consider factors like revenue size, EBITDA size, team size, service offerings, and client profile. This clarity will save you time and energy as you evaluate opportunities.

The book Buy, Then Build by Walker Deibel digs deeper into profiling your ideal acquisition target—and about organizing the entire process. It’s worth a read. You can also get advice via events, like the Entrepreneurship Through Acquisition (ETA) conference in Chicago—which recently drew 1,000 attendees.

Acquirers value agencies based on their adjusted EBITDA (net profit, plus and minus some adjustments). See my on-demand training for recent EBITDA multiple ranges—and consult with an M&A advisor on how far your budget might go. This also includes creative financing options, since few acquirers pay 100% down.

What’s your investment thesis?

Eventually, you’ll write an investment thesis. This describes what you’re looking for, to help you make “fast fail” decisions about acquisition targets. For instance, your thesis might be:

We will acquire a retainer-oriented agency that generates less than 10% of revenue from digital services to create cross-sell potential with its existing client base.

Or perhaps:

Acquire an agency with a maximum of $500K in EBITDA (assume a valuation of up to 3X multiple) and a strong XYZ team.

Or, be even more specific:

Acquire an agency with 20+ employees specializing in the ABC industry (with at least two blue chip clients in their portfolio) to kickstart our expansion into the industry, while adding at least $1 million in EBITDA to support our future exit.

The thesis makes it easier to enlist others to help since they can quickly decide whether it’s worth an intro.

2. Build Your Acquisition Pipeline

Identifying the right agency to acquire can take time. Start by building a pipeline of potential acquisition targets:

• Leverage your network. Industry connections can be invaluable when looking for agencies open to acquisition. Attend industry events, engage in agency communities like the Bureau of Digital and Grow Your Agency, and ask trusted peers for introductions. It’s relatively “safe” to be known as an acquirer; quiet sellers are more likely to reach out rather than publicly trumpet their exit plans.
• Work with brokers. Specialized brokers can connect you with agencies that are actively looking to sell. They can also help you navigate the complexities of the M&A process. You might get a good deal if you buy without a broker—but this might also waste your time. Expect hiccups if they don’t have a broker (and you don’t have someone representing you). For instance, a DIY seller will likely overvalue their agency and feel insulted when you make a reasonable offer.
• Direct outreach. The personal approach can work, although it’s time-consuming. If there’s an agency you’ve admired for a while, reach out to the owner. Your interest might spark a conversation even if they’re not actively looking to sell. But this can be a numbers game; you might need to reach out to dozens—or hundreds—of people.

Look for signs that an agency might be open to acquisition. Owners experiencing burnout or exploring retirement are often more receptive to offers, especially if they’ve received unsolicited interest in the past. Their tenure might be an indicator, too; if they’re hitting 10, 20, or 30 years in business, they might be thinking about next steps.

Buyer beware: Brokers cost money but add expertise

As mentioned above, some people skip working with a broker. This can be penny-wise, pound-foolish. As I share in the Control (and Maximize) Your Agency Exit training, there’s usually just one broker during an agency exit (versus two brokers when you buy or sell a house). If you hire them, you’ll pay their fee… but that also means they work for you instead of the other party.

You should hire an M&A advisor at this point or soon—especially if this is the first time you’ve bought another agency. You need someone who’s done this before. At the latest ETA Conference, an attorney mentioned he wished acquirers had asked for his firm’s advice before sending the Letter of Intent (LOI)… because they made mistakes in the LOI that are now difficult to unwind without killing the deal.

3. Reach Out to Acquisition Prospects

Once you’ve identified a promising target, it’s time to reach out. Should you take a narrow approach (asking for warm intros) or a broad approach (cold-emailing many people)? I’d lean toward a narrow approach, but I’m also not urgently seeking to acquire a firm ASAP.

If you’re going cold, track down their email address or send a LinkedIn “In” message. If you don’t have it already, it’s probably time to upgrade to a paid LinkedIn account.

• Years ago, an agency hired me to do anonymous outreach to a shortlist of acquisition targets. Of 10 agencies, two agreed to conversations, three declined (saying they weren’t interested in selling), and five didn’t respond.
• Have some way to track your outreach and responses. Consider using your sales CRM by creating a custom workflow for stages in the M&A outreach process.

You can also contact prospective sellers via listings at broker websites or broker aggregators like BizBuySell and BusinessBroker.net. But expect more vetting (of you) before you can talk to the seller. And the broker might push you to buy their other listings.

Build a relationship

Seek to build rapport with the agency owner. Remember, this is likely a deeply personal decision for them. They’ve poured years of effort into building their agency, and they’ll want to feel confident that you’re the right person to sell to. Compliment what you like about their agency.

Ideally, frame the acquisition as a partnership rather than a mere transaction. Once you get on a call, share your vision for the future and how their agency fits into it. Ask questions. Be transparent about your intentions and take the time to listen to their priorities. Many sellers care deeply about preserving their agency’s legacy, caring for their team, and ensuring a smooth transition for their clients. Address these concerns early to build trust.

In your outreach, reinforce your seriousness—including how you have (or where you’d get) funding. Anyone can “say” they want to buy, but not everyone has money. If someone asks me if I know anyone who wants to sell, I’m curious how they’re funded; I don’t want to waste my clients’ time on intros to unqualified buyers. Volunteer your funding plans—including if you’re self-funded, pre-qualified for an SBA 7(a) loan, intend to get an SBA loan, or have other access to capital.

Prepare for hiccups

Be ready for acquisition targets to drop out. This can happen after the initial conversation, when it’s time to sign an NDA, or when it’s time to start due diligence.

• Some agency owners have a reality check: “If I fix my agency today, I can make more money than if I sell, especially if the buyer insists on an earnout for a portion of the valuation.”
• It also happens when they realize there’s a culture mismatch—and they don’t want to work for the acquirer for 1-3 years before they can fully walk away.
• The seller might also have unreasonable expectations. For instance, a friend considered acquiring an agency that we estimated to be worth $1.5 million. Yet the seller insisted it was worth $3 million. I suggested my friend withdraw from the process because the seller was so off-base.

A client received a cold pitch to sell his agency. You probably get those all the time. Yet this was a legitimate outreach; the acquirer was buying agencies. But as he talked to them—and even flew to their headquarters to get to know them better—they clearly had a very different culture. His team wouldn’t stick around, and he’d be antsy to leave ASAP, too. He backed out before getting to an LOI.

4. Evaluate the Agency’s Fit

Acquisitions are as much about the right fit as they are about financials. Once you’ve established mutual interest—including sending your LOI—it’s time to dig deeper through due diligence. This is a complex process; you’ll want to enlist an experienced CPA, M&A advisor, and/or others.

In his excellent primer, Selling Your Professional Services Firm, agency advisor David C. Baker notes that a quick “courtship” can lead to a painful due diligence process. In contrast, a longer preliminary process (e.g., more conversations before finalizing the terms) can go more smoothly in the end because the acquirer took the time upfront to see if things are truly a match.

Do the due diligence

At a high level, here are key areas to evaluate during due diligence:

• Financial health: Examine the agency’s revenue trends, profitability, debts, and potential liabilities. Understanding their financial position will help you structure a fair deal. This includes understanding what to adjust (e.g., are they paying themselves via excessive owner “draws” that now should be deducted from the adjusted EBITDA, or paying for a company car that would get added back to the adjusted EBITDA?). Your accountant might refer to Quality of Earnings (QoE), which attempts to quantify the stability of the firm’s profits.
• Client portfolio: Assess the stability and retention of their client base. Are contracts long-term or project-based? Are there any conflicts with your existing clients? If they lose a significant portion of the clients after the deal closes, how might you protect yourself via earnouts and other strategies? Are the contracts “assignable” to your firm (giving you the option of an “asset sale” instead of a “stock sale”… see below)?
• Team and culture: In my experience as an agency advisor, culture mismatch can derail even the most promising acquisition. Evaluate how well their team’s values and work style align with yours. I worked with an agency that had bought another firm two years before. Due to mismanagement and a failed integration, most of the acquired agency’s clients and team had walked out the door. The acquirer had overpaid for the team—and profit margins—that didn’t exist anymore.
• Operational systems: Review their tools, processes, and workflows. Consider how easily they’ll integrate with your existing operations.

A seller who has prepared their agency for acquisition (clean financials, well-documented processes, incentives to retain key employees, etc.) will make the transition much smoother. If they’re working with a broker, they’re more likely to be ready than a “for sale by owner” that you cold-pitched.

Your strongest negotiating power is your willingness to walk away. You might find serious concerns during due diligence—or maybe several medium-sized concerns. Don’t be afraid to walk away if red flags emerge during due diligence. But it’ll be harder due to the “sunk cost fallacy“—because you’ve invested time and money into the process.

5. Structure the Deal

Once you decide to move forward, it’s time to structure the deal. Again, consult an M&A advisor and your lawyer. But at a high level… there are several ways to approach this:

• Asset purchase vs. stock purchase. Decide whether you’re buying specific assets (like clients and intellectual property) or the entire business. An asset sale lets you pick and choose what you bring over. A stock sale makes transferring client and employee agreements easier, but also transfers legal liabilities. Your tax advisor and attorney can walk you through the pros and cons.
• Upfront payment vs. earnouts. Earnouts—where a portion of the purchase price is tied to the agency’s future performance—are common in agency acquisitions. They provide security for the buyer while rewarding the seller for a successful transition. Remember that the seller may want to stick around to increase the odds of hitting the targets. This can be helpful in that they’re engaged, but it can create a leadership vacuum if clients and the team don’t recognize that you’re in charge.

Negotiations should address more than just the price; terms are important, too. Consider terms like:

• How will you retain key team members, and is there a reduction in valuation if key people leave before a certain point?
• How will you handle client communications during the transition?
• What are everyone’s transition timelines and roles?

Money is important but sellers often care about more than money. Show them that you value their legacy and are committed—within reason—to preserving what they’ve built. But be sure you’re getting an appropriate discount or other concessions; if they expect you to treat the company like a static monument, that limits your ability to make improvements.

6. Create an Integration & Transition Plan

The real work begins after the deal is signed. A well-executed transition plan is critical to retaining clients, employees, and the value of the acquired agency. And the flip side—a poor integration—will lead to expensive departures and lots of stress.

• Communication: Develop a clear communication strategy for clients, employees, and the broader industry community. Be transparent about what’s changing and what’s staying the same. This may include a certain level of “TBD” if you’re not sure what will happen—but this is a balancing act; too much “TBD” creates a leadership vacuum. Plan on repeating yourself a lot—and investing time for a “listening tour.”
• Onboarding: Invest time in onboarding the new team and integrating their processes with yours. Create a roadmap for aligning tools and workflows. Decide which software platforms “win” in the integration. Usually, the acquired firm switches to what the acquirer uses. But if their system is better, it might make sense to migrate to their tools instead.
• Retention: Offer incentives to retain key employees from the acquired agency. Their expertise and relationships will smooth the transition. But don’t over-promise. If someone turns out to be incompetent, you want them gone in 3-6 months… not years.

You’ll pre-negotiate the seller’s involvement during the transition period. If it’s a two-year term, perhaps they’re full-time for a year as they focus on business development, thought leadership, and client renewals. Then they’re part-time for a year, referring sales leads to you or a full-time salesperson. After that, they might receive a referral fee for sales leads but no ongoing salary or benefits. This is all negotiable; you’ll need to determine what’s right for you and them.

Try to put yourself into the shoes of people at the acquired firm. I mentioned the client whose integration had gone poorly two years before I started working with them. When I spoke with employees at the acquired firm, they described feeling like they were the “loser” in the deal. The new CEO only visited their office when something went wrong; they hadn’t kept any of their old software platforms, and they now had to operate in the acquirer’s time zone, which required extra thinking every time they sent a calendar invite.

7. Mitigate Risks and Challenges

Acquisitions are inherently risky because sellers have an incentive to downplay or even hide problems. Even if someone is generally honest, they likely won’t disclose everything about running their business. (Acquisitions are risky for sellers, too; as a buyer, what if you can’t pay?)

In my work advising agencies, there are always post-acquisition surprises. If you’ve invested more time in the “get to know you” and due diligence process, those surprises tend to be smaller. If you’ve moved fast—and haven’t gotten to know the seller’s character or have ignored concerns about their character—the surprises tend to be bigger.

It helps to work with someone who’s been there before—but here are some risks to watch for and manage:

• Culture mismatch: Invest in culture alignment early. This includes understanding team dynamics, work styles, and values. You likely won’t retain 100% of the previous team—and may not want to keep 100%—but you’ll ideally keep the people you want. Employees will often adopt a “wait and see” attitude since the acquisition usually means new opportunities to grow in their careers.
• Operational hiccups: Integration often takes longer and costs more than expected. Plan on 12+ months… but if it extends to 24+ months, you might be in over your head. Build contingencies into your plan to account for unexpected challenges. In my work, I often see integration challenges where the acquirer didn’t think things through. Your team can help—both your current team and new team members.
• Earnout complications: Be realistic about performance goals tied to the earnout. Set mutually agreed-upon metrics and maintain open communication. If the seller isn’t going to hit an earnout target, they ideally knew it months in advance rather than after the deadline passes.

Schedule regular check-ins with key stakeholders. These can help you identify and address problems before they get worse. Ideally, you expand your leadership team to include new employees, too.

8. Measure Success Post-Acquisition

How will you know if the acquisition is successful? Beyond how it all feels, plan to track key metrics like this:

• Financial performance: Are revenue and profitability improving?
• Client retention: Are you retaining the acquired agency’s clients?
• Employee engagement: Are team members from both agencies satisfied and productive?

Schedule debriefs at 30, 90, and 180 days to evaluate progress and adjust your strategy. Stay flexible; integration is an iterative process, and unexpected challenges are inevitable. You—and the seller—probably want to schedule some PTO for after the deal closes.

Conclusion: How to Buy Another Agency

Buying another agency can be an effective way to grow your business, but it requires careful planning and execution. To increase your odds of success, clarify your goals, build a pipeline of potential acquisition targets, get to know the sellers, conduct thorough due diligence, and prioritize a smooth transition.

Ready to explore agency acquisitions?

• Check out the books I mentioned above—and consider doing my Control (and Maximize) Your Agency Exit on-demand training. The training focuses on people selling their agency, but you can “flip” the advice to consider how to create a win/win deal… and to learn some of the tricks they might use.
• If you’d like 1:1 consulting advice based on my work across hundreds of agencies—including pre- and post-acquisition—please reach out. Based on your goals, my team can recommend options to help.

Question: What goals would you accomplish by acquiring another agency?