Yesterday, I was reading a story on Forbes India website about how Taproot in a span of 2 years of its foundation sold a majority stake of 51 percent to Japanese major Dentsu Communications for about Rs 60 – 70 Crore (industry speculation). Not bad for the founders who have pocketed in a few crores for themselves and continue to be at the help of now a company that is a part of global communications network major. However, that’s just one side. On the other hand, there are a few other independent agencies that are not open to becoming a part of global communication agencies. Reasons? Major reason could be, unsurprisingly, a significant gap in the valuation from the seller and prospective buyer. Another could be, gladly, that they do not want to lose their individuality by being a small fish in big pond.
In my opinion, the independent agency owner can be divided into two kinds. One who are open to selling majority stakes so that they can leverage on a bigger agency clientele and also make quick and big bucks. The others who are content are sizing up on their own but could be open to strategic investments from private investors. Truly and honestly, I adore the latter. They are the ones who go on to become the Martin Sorells of advertising orbit; the others become victim of economic colonization. With acquisitions of Indian agencies by big foreign communications group, it almost seems impossible that we could ever have an indigenous global communications company of the size, scale and reach of a WPP or Dentsu or an Omnicom. But then in our country independent agencies have only started to mushroom very recently. The US has W+K, a large independent agency known for handling global account of Nike, which has never fallen to the lucrative bait of acquisitions.
It is ought to be true that when entrepreneurs seed an agency, they are not thinking about the selling price or even about whether they would sell or reach that stage ever. It is only after attaining a certain size and scale that agency founders speculate selling a stake. But then the question always is: when do you sell? There two broader factors that influence such this decision are a) if the company has grown to optimum with self-funding? b) the ecosystem allows a strategic acquisition that could lead to a win situation? For an agency in India, primarily traditional, there has perhaps never been a better time to sell stake. For digital, this might be a good time sell a stake and get investor’s money, but better time is yet to come. Patience is the key.
Then, when you sell or buy, the capabilities should complement than compete. For example, it makes more sense for a digital agency to merge with an established traditional agency which could lead to a win-win deal. Blindly getting acquired for a boost in investment or only to have a ‘brand’ name to your agency would not be a strategic move in a long term.
To sell or not to sell? The question will continue to baffle.