Paul Holmes 25 Oct 2022 // 6:04PM GMT
WASHINGTON, DC — The growing importance of strategic communications in a complex world has made public relations firms a more attractive target for private equity and other potential buyers, attendees at the PRovokeGlobal summit heard during a discussion of “The State of M&A in a Post-Pandemic World,” sponsored by Davis+Gilbert.
Megan Wallach, vice president at Shamrock Capital Advisors, which a month ago invested in tech PR specialist Highwire, told the audience: “There has been a growing importance of strategic communications. Consumers are looking for purpose and authenticity. Communications is always on, across channels and across stakeholders. It’s a C-suite priority now. And Covid, of course, accelerated all that.”
Wallach’s comments followed the unveiling of new research from Davis+Gilbert, conducted in partnership with PRovoke Media, which showed not only robust financial performance but increased M&A activity in the sector.
One reason, said Maurizio Maione, chief of the CEO staff at SEC Newgate, an Italian holding group that has made several acquisitions in Europe and Asia and recently bought New York public affairs firm Global Strategy Group, is that “there are more buyers today, with different motivations, and firms have different reasons for wanting to sell.”
That diversity of acquirers and proliferation of targets notwithstanding, there was broad agreement among the panelists about what was important to them in a new acquisition — and what has changed in recent years.
Said Jennifer Gottlieb, global president and chief client officer at healthcare giant Real Chemistry, which has acquired both PR firms and adjacent disciplines: “For us it comes down to three things. First, we look for something complementary to what we already have. We listen to our clients and what they are looking for. The second thing is we look for firms that are best in class. Is what we hear about them what is really happening on the inside?
“And then the third thing is talent, and a bench of people underneath the top people. A lot of founders stay with us but it’s important there’s not a key man-key woman syndrome going on.”
Meanwhile, Nick Burton, group strategy and M&A director at Enero Group, parent of technology PR agency Hotwire: “We have a growth strategy we have articulated to our investors, and we have sectors — technology, healthcare, consumer — where we are focused. We need to be agile to respond to what is out there and the evolving needs of our clients, but are a growth business, and that’s our raison d’etre, so we don’t look at what costs we can remove.
“But finally, we have learned that cultural fit is so important. Are we going to enjoy going to work with these people and building this vision together? Do we have shared values and shared ambitions?”
Burton also discussed the ways in which deals could go wrong: “The first thing is skeletons in the closet whether that’s legal issues or people issues or something, financial issues. The second is that we discover there’s no alignment and agreement on strategic vision. We try to be honest about where we see the business going.
“But again culture is the big one where we have had deals fall apart.”
The other common advice focused on preparation, with all the potential buyers agreeing that firms needed to run their business — in terms of financial hygiene in particular — as if they were preparing to sell long before they actually made the decision to sell. Maione pointed to Global Strategy Group, which he said “was the best prepared company when we met them, even though they were not yet thinking about selling.”
Finally, there was agreement that the acquisition climate would stay hot for the foreseeable future, even in changing economic conditions. Said Burton: “I don’t think we’re going to see a massive pullback in the market where deals dry up. The number of buyers has expanded and all of those buys are still out there.
“I don’t think we’re going to see a 2021 buying frenzy, but I don’t think the market is going to come to a standstill.”