Why would I buy when I can build for free?

Smaller agencies relying on organic growth risk falling behind. M&A offers a faster path to scale, capability, and relevance, but only if done properly. With the right structure, acquisitions can be self-funding, making them accessible, practical, and increasingly desirable.

Why would I buy when I can build for free? It’s question that sounds natural, logical, kind of correct? None of us like paying for things we think we don’t need. So, on the face of it, it’s an entirely reasonable pushback to someone like me.

After all, why take on risk, cost and complexity when you can grow your agency the way you always have, steadily, carefully, and under your own control? Why introduce other people, other cultures, other unknowns, when you can build it yourself and keep things clean?

I thought the same for a long time. But then... you only know what you know.

These days, I know better. The problem isn’t that the question is wrong, it’s that it’s incomplete. It forces a binary choice that doesn’t exist in the real world. The agencies I meet that are moving with intent, that are building momentum, building market power are not choosing between building and buying, they are doing both. They are doing it for one reason above all others: speed.

Scale is not a vanity metric

Everyone is using AI now, or at least saying they are. The tools are everywhere, the barriers to entry are low, and the language of “AI-enabled” has already become part of the standard pitch. But that isn’t where the real divide is forming.

The divide is between those who are simply using what is available, and those who are building something of their own. Something proprietary, something defensible, something that creates an advantage that is not easily eroded as the technology becomes more widespread.

That kind of capability requires three things most smaller agencies struggle to access consistently: capital to experiment, talent to build, and the organisational maturity to deploy it properly. You need cash flow to try things without risking the core business, you need people who can operate at a higher level than your current structure may support, and you need enough substance as an organisation to make all of that credible to clients who are, quietly but steadily, raising their expectations.

But all agencies (IMO) need to be thinking thinking this way. Agencies need to be asking: “how do we remain relevant in a market that is shifting underneath us?” And shifting it is. Chasing scale is about being big enough to take proactive action, to build proprietary tools or data sets, to change your people profile. It has nothing to do with ego, or league tables, or vanity metrics like headcount.

You can choose not to play

I should say, that none of what I am writing about is compulsory. You may not agree with me and that’s ok. But here’s a spin for you.

Markets always have a distribution. There is always room at the smaller, more specialised end, just as there is at the larger, more scaled end. People still make greeting cards by hand, and they do quite well from it. Agencies still build websites in Wordpress, even though the same outcome can now be achieved faster and more cheaply in other ways.

The question then, isn’t whether a non-AI influenced, non-transformed, non-growth focused part of the market will exist. It will. The question is whether that is where you want to be. Because, to my mind at least, the trade-offs are becoming clearer.

Organic growth tends to slow, not dramatically, but persistently. Sales cycles stretch, not catastrophically, but enough to be felt. Client profiles shift, often away from the more ambitious, better funded opportunities and towards work that is easier to win but harder to scale. Talent follows a similar pattern, gravitating towards environments where the work is edgier, the toolset and tech is better, and the ambition is more obvious.

You can build a perfectly good business in the bottom half of the distribution curve, but you should do so consciously. That means understanding what you are choosing and, just as importantly, what you are not.

The myth of “free” growth

Organic growth is often described as free, but that is only true in the narrowest sense (if at all). It may not require a cheque to be written upfront, but it does require time, and time is the one resource you can’t compound.

From my research of published league tables, agencies are currently growing organically at an average of somewhere between three and five percent a year. Some outperform that, often significantly, but they are the exception rather than the rule. Over a five-year period, growth like this changes the business, but not fundamentally. It is evolution rather than transformation. 5% per year over five years is total growth of 27.6%. I’ll take any growth I can get, but 5% isn’t going to allow me to build capability.

PE houses look for 15% annual growth as an entry-level requirement for a platform investment. Over five years, 15% doubles the size of a company. That’s worth having, but if you are inside the business, it’s going to feel like a long time. That’s not all.

Along the way, other issues tend to emerge. Client concentration builds as a small number of relationships carry a disproportionate amount of the growth. New capabilities take longer to establish than expected, often because they rely on one or two key hires who may or may not work out. Senior recruitment, in particular, has a habit of looking straightforward on paper and proving anything but in practice.

It is not uncommon to see an agency spend two or three years trying to build a capability that a competitor acquires in a matter of months.

Building works, it’s just slow, and it’s not risk-free either.

The reality of how deals work

This is the point at which the conversation usually shifts - once the reality of doing it all organically kicks in. Then, when it does shift, I find that most objections to using M&A to scale are based on an assumption that’s only partially true. That is, that M&A is only possible for big businesses.

Good agencies can, and often do complete cash-flow acquisitions. With sensible structuring, the burden of a deal is not carried entirely upfront, but is shared over time, and in many cases supported by the performance of the business being acquired.

A simple example illustrates the point.

Take a £3m agency acquiring a £1m agency delivering £200k of EBITDA. In the current market, a small business like this might be valued at around 3.5x times (subject to quality), placing it somewhere in the region of £700–800k. If there is £100k of surplus cash in the business, the total consideration on a cash-free, debt-free basis might land around £800k.

At completion, perhaps half of that is paid, with the balance deferred over a two or three years. Of the upfront payment, a portion may come from the target itself, reducing the amount of external funding required. What remains is then paid out of future cash flows, ideally supported by the continued performance of the acquired business and the incremental benefit of combining the two.

At the end of that period, the acquirer has deployed a defined amount of capital and owns a larger, more valuable business, with the potential for further upside through growth and, in time, multiple expansion.

It is not without risk, but it is not the insurmountable financial barrier it is often assumed to be. The critical factor is not access to capital in isolation, but the ability to structure a deal in a way that aligns risk, reward and cash flow over time.

Why most owners still hesitate

And yet, despite this, most owners do not pursue acquisitions, at least not seriously.

Part of that is fear, although it rarely presents itself directly. It shows up in more socially acceptable forms: a concern about getting it wrong, a sense that the business has reached a natural limit, a reliance on the cash it generates for lifestyle or obligations that make risk harder to tolerate.

There is also an element of identity. Building something from nothing carries a certain weight, and the idea of bringing something in from the outside can feel, to some, like a departure from that narrative. Like cheating.

More practically, the market itself can be difficult to navigate. There is no shortage of advice, but its quality is variable, and for those without prior experience it can be hard to distinguish between what is useful and what is not.

Underlying all of this, however, is a simpler issue. Most owners do not understand how deals are structured. They do not understand how leverage is used, how risk can be shared, or how value is created over time rather than paid for upfront. Without that understanding, the whole exercise appears more complex and more dangerous than it necessarily is.

Where things tend to go wrong

Experience tends to correct that, although not always cheaply.

It is common, particularly with first-time buyers, to assume that a deal which appears self-funding on paper will behave in a linear and predictable way after completion. The model shows steady performance, the integration plan seems straightforward, and the numbers suggest that the acquisition will carry its own weight.

In practice, the opposite is often true, at least in the short term. Revenue dips are not unusual, whether through client churn, distraction during integration, or simply the disruption that comes with change. Forecasts that assume continuity prove optimistic, and the margin for error, which may have appeared comfortable, tightens quickly.

Cash becomes more constrained, and where debt has been introduced, covenants begin to feel less theoretical and more immediate. Decisions that should have been strategic become reactive, with cost reductions and operational compromises introduced to stabilise the position.

The issue, more often than not, is not the existence of risk but the failure to anticipate and structure for it. Poor target selection, overly optimistic modelling, and weak deal structuring tend to compound, turning what might have been a manageable situation into something more acute.

What “doing it properly” requires

None of this suggests that M&A is inherently problematic, only that it rewards preparation and punishes its absence.

Before engaging with potential targets, there is a need for clarity on what constitutes a good fit, not just in terms of size or sector, but in terms of culture, capability and strategic intent. There is a need for robust financial modelling that considers not only the upside case, but also the downside, including scenarios in which performance softens or integration takes longer than expected.

There is also a need for a deliberate approach to origination, rather than a reliance on whatever opportunities happen to surface, and a clear understanding of the signals that indicate when a deal should not proceed.

In simple terms, before looking at a target, you need to know how to assess it, how to structure it, and how to walk away from it.

A window, not a certainty

M&A is not reserved for large, headline transactions. The majority of activity in the market takes place at a smaller scale, often without publicity, but with meaningful impact for those involved.

What is changing is not the availability of these opportunities, but the context in which they are pursued. The gap between agencies that are scaling and those that are not is becoming more pronounced, and the factors driving that gap, from technology to talent to client expectation, show little sign of slowing.

It is entirely possible to opt out of that dynamic and to build a business that operates successfully on different terms. Many will, and many will do so by choice.

For those who want to grow more quickly, to build something larger, or to position themselves differently in the market, M&A represents a practical and increasingly relevant tool. The opportunity to use it in that way exists now, but it should not be assumed to persist indefinitely.

If you are serious about understanding how to approach this properly, there are ways to accelerate the learning process, to avoid the more obvious mistakes, and to build the confidence required to act with intent rather than hesitation.

It is not for everyone. But for those already considering how to move beyond the limits of organic growth, it is worth taking seriously.