Communications & New Media May 2016 Vol 30 No 5 May 2016 | www.odwyerpr.com

FEATURE
A people-focused approach to M&A
The delicate art of putting people first during an agency acquisition
process.
By Philip A. Nardone, Jr.
According to a recent KPMG study, 83
percent of all company mergers fail.
That’s higher than the U.S. divorce
rate by more than 30 percent! The fact is,
getting into bed with another agency is a big
decision. Beyond the financials are cultural
and philosophical considerations agency
leaders must make. In order to ensure a lasting
and mutually beneficial union, agency
heads must strike a delicate balance between
science and intuition.
When I first stepped onto the path toward
our eventual acquisition of Vantage PR in
December of 2015, I was surprised to find
how akin the experience was to a romantic
engagement. Timing, courtship and compromise
played heavily in our ability to find
PAN’s counterpart in another firm. Several
of my preconceptions about the process
were quickly disproved, and I settled in for a
much longer and more intimate journey than
I’d originally anticipated.
Timing is everything
According to a survey by The Stevens
Group, 92 percent of independent firm owners
are planning to sell, 44 percent within the
next five years. That means the opportunity
is ripe for acquiring firms — but that doesn’t
necessarily mean the timing is right. Knowing
when to enter the mergers and acquisition
game is half the battle.
As an agency leader, it’s essential to have
your finger on the pulse of both internal and
external cues that an acquisition is needed.
In my own search, I looked beyond market
opportunity — at signals coming from our
client base and employees — before pulling
the trigger. I turned to our client portfolio
leaders and business development heads to
understand where our biggest geographic
PR news brief
Kekst works Diamond Crystal
Brands sale
Kekst and Company is representing Peak Rock Capital
in its acquisition of foodservice supplier Diamond
Crystal Brands from Hormel Foods.
Austin-based DCB makes condiments, sauces,
sweeteners, dressings and other food and beverage
products for the food service sector.
Kekst managing director Daniel Yunger reps Peak
Rock.
Hormel said it will provide financial details of the
deal on its second quarter earnings call May 18.
Wendy Watkins, VP of corporate comms. for Hormel,
handles PR for the deal.
and vertical growth opportunities existed.
Then, I consulted human resources to see
where those opportunities aligned with employee
interests and available talent. I realized
quickly that speed is far less important
than diligence when it comes to unearthing a
perfect match.
Learning to date
I was also surprised to learn that playing
the field is essential in mergers and acquisitions.
While I favor monogamy in my personal
relationships, I realized quickly that
I’d need to explore a plethora of potentials
in order to find the right partner for PAN. I
had to quickly assess financial and cultural
fit in order to narrow the field.
I enlisted the help of my CFO to drive efficiency
in this process and kept meticulous
notes on each potential partner. While my
CFO explored the financial health of our top
candidates, looking at indicators like EBIT-
DA scores, year-over-year growth, topline
revenue and profit margins, I got personal
with company leadership to assess whether
our cultures and values aligned.
Falling in love
The courtship period of an acquisition is
similar to a romantic relationship in that you
must be willing to reveal your true self and
encourage potential partners to do the same.
Beyond fundamental discussions around
business aspirations and values, it’s essential
to ask the more difficult questions about
company culture and employee happiness.
Cultural differences are among the most
frequently cited reasons that acquisitions
fail. If you’re making an acquisition to acquire
talent and headcount in key geographies,
for example, you simply can’t afford
to join forces with a firm who is struggling
with retention. In my own search, I didn’t
shy away from building genuine relationships
with the leaders I met, encouraging
spouses to join business dinners to get a
more dynamic view and reaching out to industry
colleagues for insight and opinions.
We also turned to employee review sites for
an authentic look at employee happiness and
a pulse-check on organizational health and
alignment with our culture and values.
Breaking up
As you might expect, not every prospect
will be a perfect match. While unpleasant,
breakups are an inevitable part of the acquisition
experience. Over the course of PAN’s
acquisition journey, I learned a few tough
lessons about how to spot red flags — i.e. declining
assets — and how to protect my own
leadership and employees through this process.
In order to avoid impacting employee
morale, keep your mergers and acquisition
team small and your conversations private.
My team consisted only of our human resources,
finance and business development
leaders until a letter of intent was signed.
These folks were essential to our initial
evaluations. Our head of human resources
reviewed employee
data and practices to
ensure the talent pool
was aligned with our
needs, while our head
of business development
assessed whether
our core competencies
and geographic needs
aligned. As mentioned,
our CFO was integral in
evaluating the financial
Philip Nardone, Jr.
health and viability of prospects. It wasn’t
until we had vetted and chosen one firm that
our vice presidents and mid-level executives
were brought in.
While it may seem unnatural to keep
employees at a distance in the age of total
transparency, it’s essential during the initial
phases of this process. We were open with
our staff about our plans to acquire, the
strategic goals behind it and our anticipated
timeline, but we didn’t delve into the finer
details until the deal was done. This helped
us to keep anticipation high and disappointment
low amongst our staff.
Going the distance
As you might expect, your work is not
done once your partner is chosen. In order
to build an enduring relationship, a successful
integration is essential. This will require
careful attention and division of responsibility
across your leadership team and collaboration
amongst all employees. With our acquisition
of Vantage PR, PAN grew to over
100 employees and expanded our footprint
across the country. With this growth came
new challenges impacting our entire organization.
Decisions are being made on everything
from our company culture, to our IT
infrastructure, to our approach to client relations
and business development.
The hardest work has just begun, but each
new trial has served to reinforce the natural
alignment between our two firms. Putting
people at the center of this process — in both
the discovery and the integration phases —
has made fostering mutual respect and finding
common ground easy.
Philip A. Nardone Jr. is President and
CEO of PAN Communications.
18 MAY 2016 | WWW.ODWYERPR.COM