E51: The Origination Edge: How Herringbone is Buying Agencies at Velocity

SummaryIn this episode, Azim Nagree, head of M&A at Herringbone Digital, shares insights on building a successful origination engine, the importance of early and honest communication in M&A, and how agencies can prepare for sale by focusing on retention, growth, and profitability.TakeawaysOpen and honest conversations early in the process streamline deals.Retention rate of 80% is a key indicator of business health.Growth of 15-20% and EBITDA of 20-25% are desirable benchmarks.AI should improve core business metrics to add value.Founders should focus on building a strong foundation before sale.Chapters00:00 Introduction and Milestone Celebration01:10 Azim Nagree’s Background and Herringbone's Focus05:42 Herringbone's Acquisition Strategy and Ideal Targets07:49 Relationship with Private Equity and Deal Support09:21 Lessons from Deal Experience and Early Communication13:43 Deal Origination Process and Tech Stack15:00 Defining the Prospect Universe and Narrowing the Buy Box16:33 Balancing Organic and Broker Deal Sourcing18:43 Assessing Seller Readiness and Valuation Expectations20:01 Using the 'Magic Number' to Evaluate Sellers23:57 The Triangle of Value: Retention, Growth, Profitability25:21 Evaluating EBITDA and Adjusted EBITDA28:57 Retention and Growth Benchmarks for Agencies29:59 The Leaky Bucket Problem in Agencies30:05 Identifying Signs of Retention Issues30:36 Impact of AI on Agency Valuation and Performance34:09 Common Mistakes Before Selling an Agency35:36 Advice for Founders Considering Exit36:47 Managing Communications with Potential Buyers39:51 Closing Remarks and Key TakeawaysConnect with Christian and AyeletAyelet’s LinkedIn: https://www.linkedin.com/in/ayelet-shipley-b16330149/Christian's LinkedIn: https://www.linkedin.com/in/hassold/Web: https://www.inorganicpodcast.coIn/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featuredConnect with Azim Nagree on LinkedInHerringbone Digital - https://herringbonedigital.com Azim Nagree on LinkedIn https://www.linkedin.com/in/azimnagree/  Hosted on Acast. See acast.com/privacy for more information.