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You may be tempted by that flashy merger deal, but here are a few reasons you should think twice before diving in.
5 min read
Opinions expressed by Entrepreneur contributors are their own.
For many companies, a merger is a clear path to greater revenue and success. If it wasn’t, M&A activity in marketing wouldn’t have reached $33 billion in 2018 — a 144 percent increase compared to 2017, according to data from R3. For the right company, merging pays off — combining resources, reach and profits do tend to have that effect — but that doesn’t mean it’s a good idea for everyone.
For smaller companies, mergers may yield more negatives than positives. Yes, more money is a good thing, but it comes at a price. A merger costs you autonomy, including control of your vision and the freedom to make smart investments and hire new talent. As more pressure builds to prove quarterly growth, creativity may suffer, values may shift and the foundation of the company may crack under the influence of outside investors.
That’s not to say merging is always wrong, but you should consider the benefits of maintaining independence. For one thing, you’re committed to your clients, rather than a board of investors. While it’s important to focus on improvement no matter what, when you don’t have to prove quarterly growth to a board, you can play the long game with investments. You have the freedom to take necessary risks without becoming so hyperfocused on the bottom line that it hurts your client relationships.
So what does it take to stay independent without having to stay small? Here are a few best practices and examples of companies that have made it happen.
1. Champion your clients and their objectives.
Invest in services that help you keep your promises to clients and fulfill the mission you set out to pursue. Learn what your clients want, what they need and what they don’t need. Then, take that information to heart before every business decision. Every time you’re tempted to merge, ask yourself: Is this benefiting my clients?
Executives at In-N-Out Burger, for example, have cited the fast-food chain’s commitment to delivering quality food to its customers as its main reason for staying independent. Walk into any In-N-Out, and you won’t find any freezers or microwaves — a rarity in the fast-food industry. Additionally, the company ensures that all locations are within 300 miles of its distribution centers.
These types of measures wouldn’t be possible if the company was acquired. And despite the fact that it can’t expand across the country, In-N-Out continues to thrive, as demonstrated by its epic drive-thru lines.
2. Focus on building a strong team.
Because independent companies don’t have to prove quarterly growth to a board and are able to play the long game with investments, they have more say in the hiring process. What does that mean for you? In short, you can make larger, longer-term investments in the right people and projects — ones that can transform the trajectory of your agency and the work you can do for your clients.
Twice a year, my company identifies and adds new experiential verticals that attract more creative talent, upping the ante on what we can deliver for our clients. If we had to regularly justify these investments to a board, we might have missed some important opportunities.
For instance, we found that clients increasingly wanted to know more about return on investment, so we expanded our brand influence division and developed a proprietary measurement metric called the Attention Quotient. Additionally, we added an in-house fabrication shop, a 14,000-square-foot facility that required its own operations teams. This brought more creative talent to our team, contributing to an overall stronger community within the company.
3. Push creative potential.
Plenty of successful agencies found the spotlight by focusing on pushing boundaries instead of M&As. When agencies are subsidiaries of public companies, they often face different incentive structures fixated on shareholders. This could mean ignoring creative visions for the sake of ensuring incentives are met.
Consider WPP’s 2019 strategy for growth, which involves addressing and eliminating underperforming businesses. You wouldn’t want to sacrifice your long-term vision in order to meet shortsighted performance metrics and avoid the chopping block.
Now, compare that to Wieden & Kennedy, the crème de la crème of independent, global creative agencies that boasts clients such as Nike and Bud Light. Staying independent has allowed the agency to think big and act on creative visions such as Nike’s “It’s Only Crazy Until You Do It” campaign featuring Colin Kaepernick. Controversial? Sure. Successful? Absolutely. It’s one reason Ad Age recently named Wieden & Kennedy the 2019 Agency of the Year.
Ultimately, by not being tied so tightly to the bottom line or the pressure and input of shareholders, you can make the decisions that champion clients and increase creativity rather than hold you back. Your bottom line will thank you in the long run.
May 28, 2019 at 08:06AM