Summary
In this episode, Christian Hassold and Ayelet Shipley delve into the complexities of agency valuations, exploring the interplay between buyer and seller motivations, and discussing real-world scenarios that illustrate various deal structures. They emphasize the importance of understanding the unique dynamics of the agency market, including the factors that influence valuations and the creative structuring of deals to meet the needs of both parties. In this conversation, Ayelet and Christian delve into the intricacies of business valuation, particularly focusing on earn-outs and creative deal structures. They explore how earn-outs can bridge the gap between current cash and total enterprise value, especially in lower EBITDA scenarios. The discussion also highlights the dynamics of larger deals, emphasizing the importance of timing and the need for sellers to recognize good opportunities in a fluctuating market. The conversation is rich with insights on how to structure deals that meet both buyer and seller needs while navigating the complexities of agency acquisitions.
Takeaways
• A deal occurs in the overlap of buyer and seller needs.
• Creative structuring can lead to better outcomes for sellers.
• The agency market is dynamic with many new entrants and exits.
• People, client relationships, and capabilities are key assets in agency valuations.
• Valuations can vary significantly based on market fit and potential.
• Understanding the motivations of both buyers and sellers is crucial.
• The agency landscape is evolving with increasing deal velocity. Earn-outs can be a strategic tool in business valuation.
• Trust between buyer and seller facilitates smoother transactions.
Chapters
0:48 Introduction
1:59 Why Agencies Are Built and Sold
8:03 How Buyers Assess Value
12:10 Cash Upfront vs. Long-Term Upside
14:28 Real-World Deal Scenarios
15:02 Scenario B: Traditional 80/20 Deal
19:33 Earnout Treatment in Valuation
21:21 Scenario D: Creative Deal for Smaller Agencies
26:27 Performance-Based Payment Adjustment
29:23 Why Larger Deals Are Different
32:41 Wrap-Up
Connect with Christian & Inorganic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Connect with E26 guest, Ayelet Shipley on LinkedIn
https://www.linkedin.com/in/ayelet-shipley-b16330149/
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