What Surprises Sellers in M&A

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Most agency owners say they want to sell someday… but they're building something completely unsellable. The mistake? Not only a lack of a clear vision for the future of their agency, but also a lack of understanding of what they'll need to build a sellable agency. If you're an agency owner planning to sell one day, do you understand what buyers are usually looking for? Do you know which type of buyer you're hoping to attract?

Today's featured guest understands that most agencies are acquired by private equity and built the private equity partner he felt was missing in the space. He'll talk about what actually drives valuation, what kills deals, and how to build an agency that buyers want to compete for.

Ben Gaddis is the former founder of T3, a digital agency he sold to private equity in 2019. After going through multiple acquisitions himself, he now runs an operator-led private equity firm focused exclusively on tech-enabled service and agency businesses.

As a former owner who's been on both sides of the table, he knows exactly what buyers are thinking.

In this episode, we'll discuss:

• What are private equity companies looking for in agencies?

• Recurring revenue vs. retention

• What would actually increase your agency's valuation?

• If the goal is talent, should you consider an acquisition?

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What Private Equity Actually Looks For (It's Not What You Think)

The reality is that most private equity companies are looking to buy a couple of agencies to slam them together and eventually sell them for more.

Based on this, agency owners have an idea of what these buyers want and mostly focus on revenue or EBITDA.

According to Ben, however, buyers are looking at a few core things first:

• Client concentration

• Recurring or predictable revenue

• Net revenue retention

• Founder dependency (aka key-person risk)

• Clear vision and differentiation

Let's start with client concentration.

A lot of owners panic if one client makes up 20% of revenue. Some PE firms get nervous at 10%. But Ben brings nuance here. If you've landed and retained a $2–3M client for years, that's proof you can serve at a high level. That's powerful.

The issue isn't just one big client. It's when your top 3–5 clients make up 50–60% of revenue. That's where it gets risky.

If you're in that position, you already feel it. One bad email. One procurement shift. One budget freeze. And your stomach drops.

That's not a valuation problem. That's a freedom problem.

Recurring Revenue vs. Retention (The Smarter Metric)

Everyone argues about contracts. "Should I lock clients into 12 months?" "Should we go month-to-month?"

Ben argues that the real metric is net revenue retention.

If you're at 90–100%+ retention, buyers don't care as much about contract length.

He shared a case where they bought a company with almost zero recurring revenue but 115% net revenue retention. Clients kept buying more. The business was healthy. The packaging just needed to change.

This is huge for agencies stuck in custom project hell.

Sometimes it's not your service. It's how you position and sell it.

Are you framing projects as standalone deliverables or as phases in a longer journey?

If you're stuck working in the business and scrambling for the next sale, this is where to look first.

Integration > Financial Engineering

There are two types of buyers:

• Financial engineers smashing agencies together to increase multiples

• Operator-led firms building real integrated offerings

Ben sees a lot of "fake integration." Agencies get acquired, but nothing truly connects. No shared systems. No real cross-sell. No operational synergy.

Sophisticated buyers see through that immediately.

What actually increases valuation? Additive capability.

Does one service naturally lead to another? Does it solve a deeper problem for the same buyer? Does it expand wallet share within the same account?

If you're thinking about acquisitions, don't buy revenue. Buy strategic fit.

Otherwise, you're just running two companies under one logo.

Growing Through Acquisition (And When Not To)

A lot of 7-figure agency owners hit a wall where they can't hire fast enough and start to feel overwhelmed.

The team depends on them.

Growth feels capped.

So they think: "Maybe I should acquire" and figure they should start small, as it seems easier than going through a big acquisition.

Buying a bigger company or doing a merger of equals is certainly complicated in terms of defining who's in charge and which brand should remain. So, it should be a very complementary offer with a clear leader for it to make sense.

This would be much clearer when buying a smaller business. However, here's the thing: Small acquisitions are just as hard as big ones. The legal, the integration, the emotional complexity, it's all real.

If you've never done one before, the odds of it going smoothly are low.

If the goal is talent… why not build offshore first?

With AI and real-time translation tools, the global talent pool is radically more accessible than it was even five years ago.

A lot of agency owners avoid offshore because it failed before. But the game has changed.

If your bottleneck is hiring, you might not need to buy an agency. You might need to rethink your talent strategy.

How to Prepare for a Sale (Even If You're Not Selling)

This is where most deals fall apart, and Ben believes it's important for owners to try to cover any gaps in knowledge. Try to learn as much as you can about the process and the buyer to better understand their expectations. And if you still have questions, then don't hesitate to ask!

Some aspects that owners may not understand and that you should start learning about:

• Working capital expectations

• Accrual vs. cash accounting

• Quality of Earnings (QofE) reviews

• Data cleanliness

• Revenue tagging

Furthermore, Ben recommends something most owners never do:

• Run your own QofE before going to market.

• Know your skeletons.

• Track secured revenue. At the start of each year, how much revenue is already locked in? If that number consistently grows year over year, that's powerful.

Buyers will ask about revenue by capability, revenue by sales rep, revenue by region, and client concentration by top 3/5/10.

If your data is messy, you lose leverage. And if you're thinking, "I'll figure that out when I'm ready to sell," you're already behind.

Vision Is the Real Multiplier

Right now, Ben is seeing a lack of vision + execution alignment.

AI is reshaping agency models in real time. Entire categories of services didn't exist a few months ago.

The agencies that win won't just be efficient. They'll have a tight, clear, communicated vision.

Agencies won't scale just because of a tactic. They'll scale because the vision was clear enough that the team could make decisions without the owner.

If your team can't make decisions without you, that's not a people problem.

That's a vision problem.

And that's also why you're still stuck in fulfillment.

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