The Story of a Sale

by | Oct 20, 2020

Hear the story of how Sam and his co-founders sold their £3.5m agency to M&C Saatchi – and what happened next.

In 2014, the advertising agency Lean Mean Fighting Machine was sold to M&C Saatchi. Sam Ball is one of the Co-Founders of LMFM and explains how the agency prepared for the sale, how dynamics changed and how life has been since.

Lean Mean Fighting Machine started in 2004 as a creative digital agency. ‘At the time there weren’t many of those around, we wanted to do something different. With an agency of only 26 people and one office in London we were winning awards.’

‘In 2008 we thought about selling. It was less about the number of people, but more about the mindset of the founders. Two of the founders were wanting to sell so we had to ask eachother questions. ‘We had got to the age where we thought, “Do we keep going as we are? Do we expand and take the next step? Or, do we sell?”

‘Once we had decided to sell, we didn’t want to come across as desperate. We had some conversations with other companies that were more about letting people know we were open to being bought, not so much that we were selling to the highest bidder.’

‘During a meeting with M&C Saatchi, Tom, one of our founders, made it known that we were up for acquiring. We made a list of the kinds of companies we would like to sell to. We wanted to avoid selling to a company and then suddenly having extraordinarily high targets to meet. I have had friends who have sold to the big networks and who did not enjoy it at all.’

‘Looking back, I would say that even if you’re not planning on selling, set up your agency in a way that you would if you wanted to sell now.’

‘None of us were businessmen, or wizards with the finances, so the first thing we did whilst preparing to sell was look at our books. We were each being paid a lot less than the market rate. Any investor looking to buy the company would see that if the founders were to leave, they would not be able to replace us at that rate. So, we had to start paying ourselves an accurate salary.’

‘We also had to look at our targets. We had never been overly ambitious with numbers, so we had to alter them. We were told that it is better to make a slow and steady growth than to yoyo back up and down.’

‘Our final sale was based on 1 year’s turnover with a four year earn out.’

‘Whilst the other founders and I discussed what we wanted from the sale, we looked at the least amount of money we would be happy to get overall. We settled on the fact that each of us wanted at least £1 million each, and we eventually sold for around £4 million.’

‘Our earn out was pegged to the growth of Saatchi, and before we had even moved into their offices they had lost a few big cash cows, so we started off on the backfoot. I would emphasise that when you sell it is important to be happy and satisfied with the first chunk of money you get, regardless of the possible earn out sum. We never got another penny out of it.’

‘I don’t think we scrutinised their books as much as we should have done, in our eyes they were a shiny company and we were small, we had no real reason to go deeper.’

When asked about how staff and clients felt during the transition into a much bigger corporate agency, Sam suggests that most of his clients stayed with the agency throughout the move and that he made sure to support his staff. ‘I felt a big responsibility to make sure that I didn’t just sell up and then leave everyone in a new office. I wanted to make sure they were settled and then later they were able to decide whether they wanted to stay or leave.’

‘In terms of branding we transitioned overnight, I knew that we could have kept our name but it wouldn’t have been the same and I didn’t want to dampen what had gone before.’

‘We did notice after the sale and the transition that there were a lot of differences in the cultures of both agencies. Prior to the transition, LMFM didn’t really have any issues with office politics. If we had issues or disagreements they were openly discussed and nipped in the bud, but once we joined M&C Saatchi, we noticed that a head count of 250 employees meant that politics was more of a problem.’

‘After a while I noticed they would often try to solve problems with big grand gestures, hiring new CEOs or buying new agencies. After around 18 months, I gathered everyone into a meeting and discussed changing the grass root level of the agency to improve things, change that I could implement if given the reins that nobody would notice, but would quietly revolutionise the agency.’

‘I didn’t tell everyone that if they didn’t go for it I would quit, but I knew in my mind that I didn’t want to just sit back and go through the motions, I needed to do something or it was my time to go.’

‘I worked within the agency for a couple of years before I left, and in that time it was difficult to align the cultures between the two. You can’t change an organisation unless they really want changing. I had a different idea of what a creative digital agency needed to be at that time than they did, and that’s okay, it was just two different philosophies.’