Mergers and acquisitions can be a rewarding exit strategy for creative agency owners. However, achieving the best terms in a sale requires long-term planning and strategic organization. Here are practical steps to help ensure that when the time comes, your agency is an attractive and straightforward acquisition target.

Start Early. The best time to start preparing for an exit is well in advance of when you need to exit — ideally three to five years in advance. Many of the items on this list will take time to develop and more time for the benefits to start to hit your financials. To maximize your agency’s value, invest in consistently strengthening your financial records and refining internal processes. This approach not only presents the agency in its best light but also will make for a smooth transaction. 

Recurring Revenue. A $10 million agency built around recurring revenue is going to generate a better price than a $10 million agency built around stand-alone projects. The stability that retainer and subscription based engagements generate is much more attractive to buyers. If you currently rely on one-off projects, consider how to offer clients additional ongoing services like licensed software or maintenance plans that justify moving to a retainer model. 

Intellectual Property. Developing intellectual property assets is another valuable way to enhance your agency’s worth. This can include things like a registered trademark for your agency’s name and log, a software tool or CMS you can license to customers, or a large library of B‑roll can add to the overall value of your agency. 

Clean Your Books. Start working with your CPA early to ensure your financial records are spotless. Buyers want to see clean financial statements with no personal expenses or unusual transactions. A buyer likely is going to want to see 3 – 5 years of your historical financial statements so implement procedures to ensure your coming year’s financial statements are clean to avoid having to clean things up retroactively.

Convert to Accrual. Buyers generally expect to see accrual-based financial statements rather than cash-based. This affects the timing of when transactions hit your financial statements. Revenue is only booked when you do the work, even if you receive the cash beforehand. And expenses are booked when you incur the obligation, even if the money hasn’t gone out the door yet. Accrual accounting will greatly simplify some of the purchase price and working capital calculations as well as the post-transaction integration with buyer (who almost certainly is on the accrual basis)

Service Agreement Review. Review your service agreements, paying special attention to clauses that could impact the sale. 

Clauses that require consent to an assignment of the contract or a change of control to your agency can create extra work and risk in the midst of an acquisition. Ideally, your contracts should be freely assignable. If your client won’t agree to a broad assignment clause, see if you can negotiate a clause that permits assignment without consent in the context of an M&A transaction. 

If your contracts include any exclusivity clauses, non competition clauses, or non solicitation clauses, these will be items a potential buyer wants to know about if you have them. As you prepare for M&A make a policy to try to avoid these provisions in your agreement and, if you must include them, keep a list to ease the due diligence process.

Similarly, portfolio rights are essential to consider in the context of a sale. Buyers are often interested in an agency’s portfolio as a tool to attract new clients and showcase past work. Make sure your agreements contain clear terms permitting use in portfolio, social channels, and in pursuing awards and recognition.

Staff Agreements. Preparing for a transaction also means ensuring that all employees and contractors have enforceable confidentiality and invention assignment agreements. Confidentiality clauses prevent sensitive information from leaking out, while invention assignment clauses ensure that any IP created during a worker’s tenure belongs to the agency. Having good staff agreements in place will simplify due diligence and minimize the need for additional documents at closing.

Get Organized. An easy way to minimize your transaction costs is to simply be organized. You should have easy access to your corporate documents, service agreements, leases, bank documents, employment documents, insurance information, staff census, contractor agreements, referral agreements, vendor agreements, online service agreements, financial statements, tax returns, and more. Getting and staying organized will accelerate your transaction, reduce your cost, and minimize price negative price adjustments due to organizational risk. You can also ask your lawyer for an example of a typical due diligence checklist so you can start organizing your materials in a way that will facilitate a transaction

Getting M&A‑ready takes planning, but it’s well worth the effort. By starting early, your agency will have time to solidify its finances, develop internal assets, improve contracts, and get organized. You’ll be well on your way to making your agency an appealing and valuable acquisition target. Whether a sale is a few years down the line or just around the corner, these steps will help you build a more stable, scalable, and sale-ready business.