WASHINGTON, DC—Public relations owners looking to sell need to be sure they have a solid succession plan and a strong senior leadership team in place so that the firm can survive and thrive after the owner has departed, Prosper Group founder and managing partner Alex Halbur told the Independent PR Firm Forum in Washington, DC, today, during a session called “I Did it My Way: How to Sell Your Firm.”

Halbur introduced the panel discussion with a truism: that everyone who launches or leads a PR firm is going to leave that firm one way or another. “The big question is whether you are going to leave your firm prepared to prosper with you, or unprepared.” That preparation is equally important regardless of whether the agency owner is looking for an external buyer or plans to sell to an existing management team.

That point resonated with the panel, including Peter Finn, who since launching Finn Partners has made numerous acquisitions—and has seen the number of acquisition opportunities grow in recent years from 15 to 20 a year to close to 50. He said that one of the ways he filters out opportunities is to figure out how much planning the agency owner has done.

“People need to start planning at least five years—and maybe six, seven, eight years—before they want to retire,” he said. Another indication of preparation, he added, was whether the firm had brought on board an outside advisor to help them sell the business. “If they have hired an advisor, that’s a sign that they are serious and they are realistic.”

Matt Kucharski, CEO of Padilla—which went through a management transition and sold to a Canadian holding company earlier this year—said that his firm had been very focused on long-term strategy, and on what he and his predecessor Lynn Casey were looking to achieve on a personal level. That preparation stood them in good stead when they were approached by Avenir Global.

“I have been at Padilla for 30 years and I was not going to be interested in running the firm for the next 20 years,” he said. “I might be interested in running firm for seven to 10 years, which meant that if I was going to do that I needed to think about that soon. We thought about the values of the agency too, which was very much family-owned and family-oriented, so while we were not expecting to sell so soon—we had a horrible 2017—when Avenir came along, we could answer their questions.

“They wanted to see our bench and how deep our bench was, and what our long-term strategy for the agency was.”

Lisa Rose, who took over as president of Dix & Eaton in January of 2016, said that when the 66-year-old agency created its employee ownership plan—“we were determined to stay independent, so we were a little bit limited in terms of our options,” she said—it had 17 people at a vice president level or above, including “a lot of practice leaders who had been with the company for 20 years or more.”

And Charles Lewington, CEO of Hanover Group—a UK-based firm with operations in Brussels and the Middle East and more than 130 consultants—said that even firms that are not actively looking to sell can benefit from thinking about the day on which they sell. He said the firm’s non-executive chairman,  Alastair Gornall, had advised him: “run the business as if you are about to sell it, because the disciplines that help you sell the business are disciplines that are valuable on a day-to-day running of your business.

“Talking to private equity firms,” he said, “the key word you hear all the time is resilience. There are several components of resilience, of which the quality and longevity of management team is the most important.”

That was a critical priority for John Seng, who sold his Washington, DC-based healthcare firm Spectrum to a management team with the help of Prosper Group, before joining Prosper as one of its senior consultants.

Halbur said Spectrum had put in place a six-year plan, which started with bringing in “a strong alpha” to lead the new management team—current CEO Jonathan Wilson—giving him and the rest of the management team two years to demonstrate that they could grow the business before Seng stepped aside, and then allowing them another four years, during which 70% of the purchase price came out of growth and operating revenue.

As for the balance, “We had banks fighting to loan them the money to pay off the balance.”

Halbur’s advice: “We are in the middle of a historic wave of M&A activity right now, but that wave may not necessarily coincide with your transition plans. The wave may end if the economy slows. Owners need to build the second tier of management, to lock them in, and they need to have a plan to enable the agency to survive and grow without the owner. That’s the key to any kind of sale.”