When the Highest Price Is Not the Best Deal
by Miles Welch, Founder @ Milestone Advisory
Many founders measure transaction success by the headline valuation and the multiple they achieved. It is understandable. After years of building a business, the number matters. It is often the clearest way of keeping score.
But in agency and marketing services M&A, the best deal is rarely defined by price alone. In fact, the highest offer can sometimes be the wrong one.
That sounds counter-intuitive, particularly when you are sitting in a process with competing buyers and one party appears to be offering more than everyone else. But a transaction is not just about what someone says they will pay. It is about how much of that value you can actually receive, how realistic the earnout is, whether the buyer can help you grow, and whether the business, the founder and the team are set up to succeed after completion.
The multiple is only the start of the conversation.
The “effective” multiple is often more important than the headline multiple.
Headline multiples can be confusing.
A founder may say they sold for 7x, 8x, or 10x EBITDA, but that number rarely tells the full story. It may include deferred consideration, earnout targets, equity, performance conditions, and assumptions about future growth. Equally, the amount received on day one may only represent part of the overall value. That is why sellers should think carefully about the difference between the headline multiple, the day-one multiple, and the effective multiple.
The headline multiple is the shorthand usually used in the offer: the valuation divided by EBITDA. The day-one multiple looks at what is actually paid on completion compared with the EBITDA of the business at the point of sale. But the effective multiple is often the more interesting number. It asks: if you take the total consideration ultimately achieved and compare it with the EBITDA of the business at the point of sale, what multiple did the shareholders really receive?
For example, a business with £2m of EBITDA might receive £14m on completion, which looks like a 7x day-one outcome. But if the wider deal includes a further £6m of earnout that is realistic, well protected, and supported by the buyer’s platform, the effective outcome could be closer to 10x against the EBITDA at sale.
That number can be materially higher than the headline or day-one multiple if the earnout is well structured and the buyer genuinely helps the business grow. It can also be materially lower if the earnout is difficult to achieve, the integration is poor, or the seller loses control of the levers needed to deliver the plan.
That is why the better question is not simply “what multiple did you get?” but “what is the credible path to actually receiving the consideration?” This is where deal structure and buyer fit become critical.
For example, if you are selling a digital PR agency into a wider performance marketing group, the right deal structure might allow all digital PR work won across the group to flow through your P&L and contribute to your earnout. That could dramatically improve your ability to hit your targets.
Likewise, if your team helps originate work that another division of the buyer is better placed to deliver, can you negotiate a referral fee or some contribution to your earnout calculation? If the buyer’s sales team, client base, brand, geography, or delivery platform can accelerate your growth, that benefit should be part of how you assess the deal.
You should also think about protections. Can you reject unsuitable clients being imposed on you? Can you avoid low-margin work that distracts your team or damages profitability? Can you protect yourself from being pulled into work you are not set up to deliver?
These points may sound less exciting than the headline valuation, but they often determine whether the consideration is actually achievable. The art in the process is to look beyond the offer letter and ask: where is the actual value going to come from? The buyer’s platform may be worth far more than an extra turn of EBITDA on paper.
Strategic fit can beat headline value.
We once worked on the sale of a digital products business where two very different buyers were in the mix. One was a large network agency. On paper, it looked credible. It had scale, profile, and global reach. The other was a global consultancy, which may not have looked like the most obvious home at first glance.
But the consultancy had something much more valuable: an army of consultants already sitting inside major clients, in exactly the right places to identify opportunities and sell the product design toolkit the agency had developed. The acquired business did not just get a buyer; it got a ready-made sales team.
That mattered.
The founder team was initially attracted to the higher headline value elsewhere. Most founders would be. But after several chemistry and strategy discussions, they began to see the bigger point. The consultancy buyer had a clearer route to helping them achieve the earnout and, importantly, to achieving their floor consideration more easily. They understood the product and were in a position to upsell it to their enterprise client base.
By contrast, the network agency structure looked more difficult. Large networks can be powerful, but they can also be highly siloed. If each agency, discipline, or geography is effectively protecting its own turf, cross-sell becomes much harder than the buyer’s presentation might suggest.
Strategic fit is not what appears on slide seven of the acquisition deck. It is whether the buyer has the incentives, client access, and operating model to help the acquired business perform.
Earnouts are not just financial formulas.
Earnouts are often negotiated like math problems. How much? Over what period? Based on revenue, EBITDA, gross profit or something else?
All of that matters. But an earnout is not just a formula. It is an operating plan. It should also reflect the ambitions of the shareholders.
Some founders want a shorter earnout. They may have given everything to the business for 15 or 20 years and want a cleaner route to the next chapter. For them, certainty, simplicity, and a sensible handover may matter more than squeezing every last pound of theoretical upside.
Others may be energised by the buyer’s platform and see the transaction as the start of a bigger growth journey. They may want a longer earnout because it gives them more time to create value, build something larger and participate in the upside they could not have achieved alone. Neither route is right or wrong. The point is that the structure needs to mirror what the shareholders actually want post-acquisition. What role do they see for themselves with the buyer? How long do they genuinely want to stay? Do they want autonomy, a bigger platform, a gradual exit, or a new leadership challenge inside a larger group?
A deal that looks attractive financially can become difficult if the founder is locked into a structure that does not match their appetite, energy, or personal ambition.
The integration plan is just as important. Will the seller remain standalone for a period? Will integration be gradual? Will sales and marketing be fully integrated, or will there be collaboration rather than full control? What support will the buyer provide? Who makes decisions on pricing, hiring, client acceptance and delivery?
My instinct is that slow and steady is often better.
Some buyers should be careful about integrating on day one, because it may break the very thing they have just bought. A sensible starting point can be to remove some of the back office burden from the seller, allowing the leadership team to focus on clients, work quality and sales. Support can then come through sales and marketing collaboration, shared client introductions and operational improvement, with fuller integration towards the end of the earnout.
That said, there are exceptions. If the buyer really knows what they are doing, has the resources to integrate properly, and has the muscle memory from previous acquisitions, faster integration can be a good thing. It can allow the seller to take advantage of synergies, brand association, and group infrastructure much earlier.
The key point is that it should be deliberate. Integration should not be something everyone starts thinking about once the champagne has gone flat.
The management team is often the real value bridge.
One of the biggest success factors in any agency deal is the management team. The buyer will want to understand the key people in the business because, in most cases, they are the ones who will deliver the value over the long term. Some buyers will collaborate on a project before signing a deal to get a better feel for how people work.
Others will spend time understanding the heartbeat of the business: who clients trust, who drives delivery, who creates momentum, and who holds disproportionate value. For the founder, this creates an important judgement call: when do you bring the management team into the conversation? Too early, and you risk unnecessary uncertainty. Too late, and people may feel the deal is being done to them rather than with them.
The smartest route is usually to articulate the deal in terms of what the business needs next. Yes, shareholders may have financial goals, and there is nothing wrong with being open about that. But the more compelling story for the team is often about opportunity: access to bigger clients, different geographies, more resources, better work and potentially larger roles in the combined business.
A good deal should not just give the founder an exit. It should give the next generation of leadership a reason to stay.
Culture is not fluffy.
Cultural fit can sound like the soft bit of the process. It is not. Culture shows up everywhere: how decisions are made, how clients are treated, how quickly things move, how much autonomy people have, how conflict is handled, and whether the buyer really understands what makes the seller successful.
Some of the best cultural cues appear early, when discussing the types of buyers a founder could actually see themselves being part of. The chemistry meetings then become critical. You get a feeling for the people across the table, and those people usually represent the culture they come from.
But it is worth scratching below the surface. Meet more of the characters involved. Encourage collaboration where possible. See how the buyer behaves when things get difficult. The glossy version of a buyer and the lived reality inside the group are not always the same thing.
A buyer can be financially strong and culturally wrong. That combination rarely creates the best outcome.
So, what is a successful deal?
Of course, valuation matters. Consideration matters. Multiples matter. Nobody should pretend otherwise. But a truly successful deal is broader than the number on the first page of the offer letter.
It is the deal where the founder can realistically receive the value being offered. Where the buyer’s platform improves the odds of success. Where the earnout reflects the shareholder’s ambition, appetite, and role post-acquisition. Where the management team stays motivated. Where the culture fits. Where the seller is not simply absorbed, distracted, or pushed into work that undermines performance.
The highest price might still be the best deal. Sometimes it is. But founders should not assume that automatically.
In M&A, the best deal is not always the biggest number. It is the deal that gives the business, the team, and the founder the best chance of turning the promise into reality.
Miles Welch, Milestone Advisory
