5 min read
Mergers and acquisitions are usually described from the deal table, with talk of multiples, advisers and signing day. Elliott King, Managing Partner at FINN Partners, describes them from the founder’s chair. He started the digital marketing agency Mint Twist in about 2007, grew it to 33 people and sold it to FINN Partners around five years ago. He joined us on The Fractional CFO Show to explain what the process asks of a founder and what changes once the deal closes.
Why founders start thinking about mergers and acquisitions
Elliott says selling was not a serious consideration for the first nine or ten years. His reason for changing his mind is candid.
“the reason it became a consideration was because we had several near-death experiences as an agency”
Once an agency has more than about 15 people, he explains, the monthly salary bill is high enough that losing a big client or facing an outside shock quickly becomes a question of survival. After the first scare, selling looked like an escape route. Once the agency was financially steady again, the same idea looked quite different, because a larger group could offer international expansion, a wider service range, new sectors and fresh opportunities for staff.
In mergers and acquisitions language, a merger joins two companies of similar size, while an acquisition is a larger company taking over a smaller one, as the Corporate Finance Institute explains. The sale of Mint Twist was an acquisition by a larger group.
The numbers that shaped the mergers and acquisitions process
Elliott puts his agency’s preparation down largely to those early scares. They taught him the value of forecasting cash flow, which he and his co-founder, both programmers by training, had not fully appreciated in the early days. Our guide to the advantages of a cash flow forecast covers why the habit matters.
When the sale came, the agency’s financial processes were imperfect but running. Elliott calls that a good platform for due diligence, and he is clear about the alternative. A seller without those processes can still complete a deal, but faces far more work during the process and may achieve a lower price. His view of buyers is reassuring.
“if it’s a good buyer, they’re not looking to trip you up. They just want to reassure themselves that there’s no sort of skeletons in the cupboard”
A good buyer will forgive small lapses, he adds, provided the founder has a firm grip on the financial health of the business. Our guide to the meaning of due diligence covers what buyers actually check.
Two measures mattered most to him. The first was revenue mix. Mint Twist began with project work only and ended at 70% retainer and 30% project. Once retainers passed 50%, the agency became much more stable, and that predictability can make future revenue easier for a buyer to assess and may support a stronger valuation. Our business valuation guide shows how revenue quality moves the price.
The second was average client value. The agency had a long tail of small clients, with the top 20% producing 80% of revenue. Once the team set a minimum annual revenue per client, it focused on its most valuable relationships and politely moved away from poor fits. Elliott sees that as mutual, since a poor fit for the agency rarely suits the client either.
Running a business while selling it
Mergers and acquisitions timelines rarely run to plan. Elliott agreed the deal in principle a few months before Covid. The process had already taken nearly a year, and Covid added roughly another year. It held together, he says, because both sides acted in good faith. His mergers and acquisitions adviser kept stressing that courting buyers and completing due diligence take a long time, and that the founder must keep running and growing the business throughout.
Buyers want to see a healthy, growing agency, so a founder who lets the day job slip will see it in the numbers. Elliott’s answer was to split his time.
“I essentially had a day job of running the agency … And then by evenings, by the night, I would be working on the sales process and the due diligence process.”
What changes on day one after the sale
For Elliott the emotional change was huge. He moved from owner to employee, and he describes a feeling of completion, having started an agency and landed it somewhere it could grow. The job itself barely changed. He was expected to carry on running and growing the business much as before. The differences were operational, with less direct control over HR, payments to employees and invoicing to clients.
He is now five years into a six-year earn-out. Some days he looks back wistfully on full control and not needing sign-off, but he also remembers the near-death experiences. Inside a larger group, problems still arise, yet they no longer put his family and his whole life at risk in the way they do for a founder carrying everything alone. He is comfortable with that trade-off.
An earn-out is only one way to structure a sale. Our business exit planning article looks at why another founder chose an employee ownership trust over a trade sale with an earn-out.
Advice for founders still building
Asked what he would tell a founder starting out, Elliott points to finance. He recommends a basic grounding before starting any business and, once affordable, the right finance manager, adviser or fractional CFO. That support helps a business become sellable and, more importantly, gives the founder a firmer grip on their own position. He passes on advice he was given: cash is to a business what oxygen is to a person, and businesses fail when they cannot pay their bills.
A CFO’s Perspective
ACC’s view is that buyers pay for confidence in the numbers as much as for the numbers themselves. Founders who can explain margin performance, client mix and cash position in plain terms are better placed in any sale. Buyers also look hard at margin, so spending on new tools, AI included, needs a measured return, which our payback formula article explains. Our fractional CFO service builds that financial visibility years before a buyer appears.
Before the buyer arrives
Elliott’s story is a reminder that a sale rarely follows the tidy version told afterwards. The work starts years earlier, with cash flow forecasting, a healthier revenue mix and a clear view of client value, and it carries on long after completion. Founders who build those habits early give themselves more choice when the moment comes.
Elliott’s book recommendation
Elliott recommends How to Win Friends and Influence People by Dale Carnegie. He says much of it feels familiar on reading, yet it is full of wisdom of the ages and, for any business person who deals with customers, pure gold.
Frequently Asked Questions
What is the difference between a merger and an acquisition?
A merger combines two companies of similar sizes into one new business, while an acquisition is where a larger company takes over a smaller one. Most agency sales to a larger group are acquisitions, although the two are often discussed together as mergers and acquisitions.
How long do mergers and acquisitions take for an agency?
In Elliott King’s case the process had taken nearly a year before Covid added roughly another year. Timelines depend on how prepared the seller is, who the buyer is and what happens outside the deal, so founders should plan for months rather than weeks.
What do buyers look for when acquiring an agency?
Factors that buyers commonly look for include predictable revenue such as retainers, a client base that does not depend on a handful of accounts, and a founder who understands the financial health of the business. They also want to see an agency that is still growing while the sale is under way.
What happens to the founder after the sale?
It depends on the deal. Elliott King stayed on to run and grow his agency under a six-year earn-out, with less control over HR, employee payments and client invoicing. Founders should agree their role and the earn-out terms with a professional adviser before signing.
This article is intended for general information and does not constitute legal, tax, or financial advice. Every business is different, and founders should take appropriate professional advice based on their specific circumstances.
