From small acorns
Twenty-one years ago, in the spare-room of her house in Farnham, a small market-town in the UK, Gill Craig launched the Whiteoaks PR agency. Today, still in Farnham, Whiteoaks commands a fee income of over £4 million ($6.4m), 40 employees and a client-list that includes Honeywell, Teradata and Software AG. It is also six months into an MBO.
Across Europe and the US there is a large raft of owner-managed tech PR agencies, many of which have been operating since before the dotcom boom and bubble-burst. On the face of it, MBOs present an attractive option for the owner of an agency looking to step away from the business. They avoid opening up the books to a competitor; there is less chance of word of a change in the agency’s ownership escaping prematurely; they offer the prospect of continuity in people, culture and location; and, planned properly, there is less disruption. In practice, there have been few MBOs.
‘You have to plan, and plan over a long time-line,’ says James Kelliher (pictured right), chairman and chief executive officer of Whiteoaks following the buyout. ‘It was a 24-month process and very deliberate and structured. We knew where we wanted to be at each stage of the process.’ Kelliher also emphasises that agreeing terms early is essential. He adds that one hurdle can be that third-party advisers often believe that part of their value lies in helping their side renegotiate terms. Talks over an MBO at another UK agency two years ago foundered because the two sides identified a desire to do an MBO but over a protracted period were never able to agree the deal.
Was there any point at which Kelliher thought the buyout might not happen? ‘It was more challenging to put the finance in place than we expected. In the end we were supported by Lloyds, but during the process we spoke to a number of banks. At first a lot of people were confident they could support the deal; however, once it goes through their different systems and committees things can change.’
For banks to lend they have to be able to understand the business and to secure their money, which is not always straightforward in a people business. The emphasis is on showing the health of the intangible items in the business and this makes for a rigorous test of the strength of an agency. ‘You have to show that you have a good, strong, experienced team (see box) with healthy incentives to stay in the business. You also have to demonstrate that clients are happy and that their contractual status is healthy. It is another reason for a decent timeline to put everything in place. You don’t want to be thinking about your evidence for the first time when the bank is asking you.’ In other words, agency owners that wait till the point where they have had enough of running their agency will struggle to put together a deal quickly.
Nor should the story about an MBO be about significant change. Asked how he felt after the deal was finalised, Kelliher admits to feeling a little hung-over on the Saturday after the deal was inked. ‘Actually it didn’t feel like a massive change; it felt like business as usual. Gill was still coming in every day for the handover and is still retained by the agency as a consultant to make sure the transition is smooth. The MBO brought opportunities to redefine roles, promote people and accelerate their progress. But really it’s about evolution for the business.’
Instead, change at Whiteoaks is coming from its response to external challenges. As all, or most, agency managers recognise, changes to the media, fresh demands from clients and a prolonged downturn are all reshaping what agencies provide. ‘Everything we do is designed to show we deliver better ROI than anyone else,’ says Kelliher. ‘Of course we measure coverage, click-throughs and the quality and quantity of interactions with influencers. But we are now moving on to outcomes. We’ve upgraded our measurement methodology to add in extra layers, such as the impact on the likelihood to purchase and research into how we affect awareness, perceptions and intended behaviours.’
He agrees there can, in theory at least, be an issue with separating out PR’s contribution from other marketing activities, but argues: ‘Sometimes you can get too tangled up in this. If you know that all the elements – whether it’s PR, advertising, sponsorship, sales – are all aligned and you get the right outcomes then you know your programme is working.’ At a time when the choices available to marketing directors are widening Kelliher says the different roles for each marketing discipline need to be kept in mind. ‘You can measure the number of leads from direct response of telesales campaigns. But they only delivered this level of response because the audience knew the brand and had the right sort of perceptions of the brand.’
The changes to the media landscape has meant Whiteoaks, like many agencies, has invested in digital specialists: ‘You need the technical skills to understand how best to utilise the different channels.’ Where Whiteoaks is unusual is that these specialists have slotted into an agency structured around specialists. About 15 years ago the agency moved away from using generalists to having specialists working on influencer (previously media) relations, content creation and account coordination. ‘The big benefit to clients is that they always have a specialist delivering work for them. Clients tell us that at another agency they might one day have someone very good at writing produce a great piece of copy for them and then the next day have someone who isn’t. Our approach means we can deliver a consistently high level of service.’
But doesn’t an agency have to have critical mass to do this? ‘Yes. There’s no getting away from the fact that this is very difficult in a small agency where the writing specialist might be on holiday when a piece of copy is needed.’ The other argument made about this sort of model is recruitment: will generalists worry about specialising, perhaps be concerned that it will be difficult to move on? ‘It can create recruitment problems. But we spend a lot of time in the interview process finding out about people’s strengths and weaknesses and what their passions are. In reality when we say they are going to spend a vast amount of time doing what they’re good at and what they enjoy they find it quite attractive.’ The specialists are embedded into account teams, but then, Kelliher says, it is important for the specialists to have the means to share knowledge and transfer best practice.
The model is common within advertising, but not PR, with Golin Harris and more recently Octopus high-profile users of this approach. However, the question a lot of agencies face is whether the skill-sets needed to develop a strategy with the client, plan media effectively, produce content for a range of media, negotiate with the media, understand the results, and report back are now too much for a generalist.
A bank is unlikely to back an MBO based on the premise that the agency needs a radical change in direction or surgery. At the same time however, says Kelliher, they also want to see ambition. ‘For us this takes two forms. We have a practical financial number, which is part of running a business; but our objective is to continue strong growth in headcount and revenue and achieve double-digit growth each year. The other is conceptual: we want to be perceived as the leader in our ability to deliver ROI. We don’t want to be seen as a global network or the new cool kids. We want to be seen as the agency that delivers results.’
James Kelliher, Chairman and Chief Executive Officer (13 years at Whiteoaks)
Suzanne Griffiths, Managing Director (12 years)
Hayley Goff, Client Services Director (10 years)
How Gill Craig grew Whiteoaks
Festivities at a packed Whiteoaks Christmas party in December were in full swing when the agency sprung a surprise on Gill Craig (pictured left), its founder and chairman, who was stepping down following the MBO. A video featuring staff, clients and partners talked movingly about Craig and what she had brought to the agency and to them.
Rewind to the launch of the agency and 21 years were not on the agenda. ‘I was very unsure actually that I did want to launch an agency at first,’ recalls Craig, who had been working in-house. ‘It was a trial: as long as I was enjoying it and having fun I would continue. At the end of the first year I was really enjoying it; I liked hopping from project to project and challenge to challenge – it suited me.’
Some agency founders say they had a clear idea of the size of agency they wanted to be, arguing this is important in determining the agency’s direction and growth. Early on in an agency’s life, the ambitions it has, the types of staff it recruits and the work it carries out can have a big impact on its character and future. After the initial 12 months, Craig set her sights on growth, ‘But I didn’t want it to be more than twelve people; I wanted to be closely involved with the clients. This period taught me that client relationships are the most important part of an agency; understanding their problems and issues is crucial: it leads to client retention and referrals.’
Whiteoaks has in fact grown to employ more than 40 people and generate over £4 million in revenue, so what happened? ‘The business was very successful. If an agency kept a client for two years it was considered successful; we were keeping them for years. At the same time, I was always frightened of turning work down. I felt clients might cut back or merge and we might lose revenue through no fault of our own, so I kept taking on more work. We grew without really meaning to, just by doing the right things.’
Looking back, Craig identifies two principal factors in accelerating the agency’s growth. The first was the appointment of a non-executive director in 2005, which is not always a comfortable experience for entrepreneurs used to independence and not being challenged. ‘We were very lucky in having Nigel Brown [CEO of Microlease], whom I knew. He could sit back and give us an unbiased view of what we wanted to do. He forced us to have weekly executive meetings so that when we came to the board meetings these could be properly strategic looking at the finances, how we were managing clients, new business and so on. It wasn’t always easy as he asked the hard questions. But it forced us to look differently at what we were doing; he was also a very good sounding-board for us as we explored new areas.’
The second factor was the introduction of measurement, guaranteed results and an emphasis on ROI. ‘As Nigel said when we first discussed it, ‘Who buys something without knowing what they’ll get?’ Well, quite a lot of people… ‘Yes, people are still taken by surprise when we go through how we measure and how we focus on ROI. I’m just amazed if people aren’t asking for it.’
Whiteoaks was a relatively early adopter of measurement; it was very early – and still comparatively rare – in the way it structures the agency. ‘It reflects my experience at a big ad agency [Primary Contact, subsequently subsumed by Ogilvy & Mather]. There’s no way you would ask a creative to buy print, for example; they are very distinct skills. We all excel in a few skills and it makes sense to have people doing what they’re best at. It’s difficult to do with a very small agency, but it was always on my radar and when we got to twelve people we split into three skill-based teams.’
Craig says recruiting talent was consistently the biggest challenge for the agency as it grew (the bursting of the dotcom bubble and the recession after 2008 don’t get a mention). ‘It was about finding the right people at the top and bottom of the agency, people with the right skills and commitment to client service.’ Craig adds that it was also important to give people the chance to make their own decisions: ‘I had to accept that it couldn’t always be my way. If I wanted talented, enthusiastic young people to be in it for the long-term then I had to accept they needed to be able to do things their way sometimes.’
And of course a strong and credible team is also essential in an MBO. ‘Yes. Whiteoaks developed an experienced, enthusiastic, senior team that wanted to do the MBO. And we talked about it and prepared for it for a long time.’
After a long period living and breathing a business it can be difficult to step away. How easy did Craig find it to break a 21-year habit? ‘I found it really hard; especially in the first couple of months. It had been so full on: lots of travelling, 14-15 hour days, I never switched off or said I was out of the office – I always responded. And the people at Whiteoaks have very much been part of my life; we did a lot of working, travelling and socialising together. It was a very big part of my life and I loved it.’
You’ve launched, built and sold an agency – now what?
‘I’m still involved with Whiteoaks as a consultant. There are also areas I became involved with through Whiteoaks that I realised I could contribute more to: such as the Worshipful Company of Information Technologists, the Entrepreneurship Panel, and the charities Whiteoaks supports. I’m able to have time with my family I didn’t have before, which is great; and last week I went away with some girlfriends and did something I’ve never done before. I switched off my Blackberry.’