Why Private Equity Might Be Your Agency's Next Chapter: A Provocation for Creative Leaders

When I bring up the role Private Equity can play to agency leaders thinking about selling their businesses, there is usually a pause. They are picturing Gordon Gekko types eager to slash the creative teams and squeeze every penny from client relationships into a downward spiral of client loss, key talent attrition, and poor new business performance. But that narrative is about as current as three-martini lunches and holding company strategy. (I just couldn’t resist.)

“If you’re looking for a path to scale your business while maintaining its creative soul, today’s PE landscape offers more opportunities than ever.”

In fact, I'd argue it's our holding company friends behaving this way -- not private capital. 

PE firms have evolved and specialized dramatically in the last quarter century. In 2000, there were 1453 active PE firms, mostly in the US, according to Pitchbook. Today there are at least 10x that number, diversified across industries, geographies, strategies and structures. There has been a dramatic shift as well from PE firms focused on financial engineering know-how towards providing "value creation" (which is PE language for durable strategic and operational business improvements).

Today there are loads of PE firms with sharp hypotheses about audience behaviors, industry trends, technology trends, and with enough patience to allow their portfolio companies time to flourish. Most importantly, they bring a comfort with bold moves and capital investment, which creates the possibility for whole new service models, like inverted-pyramid seniority structures, marketing SaaS plus strategic services, or other IP and R&D monetization engines and platform plays that you just won't see shaking out of holding company mergers or up on stage at Cannes.

So as an agency owner looking for the perfect next chapter for your story, it might be time to rethink your options.

The New Faces of PE in Creative Services

In 2016, when Code and Theory, a digital-first creative agency, was acquired by the Stagwell Group (then a PE portfolio until its listing on NASDAQ in 2021), the shop wasn’t stripped for parts. Instead, Stagwell grew Code & Theory organically and through network acquisitions, including Kettle, Rhythm, Truelogic, Mediacurrent, and more recently YML. They grew annual revenues from 25% to 40% depending on the year, dramatically expanded their service offerings, and maintained their creative independence.

Despite the volatility in the digital agency landscape, Code & Theory claim that they are the only agency sustaining a model of 50% engineers and 50% creatives at scale, while snagging 2024’s Ad Age Business Transformation Agency of the Year. Code & Theory is a great example of a hyper-specialized PE acquisition where the buyers clearly valued the agency’s talent and capacity for long-term success.

And in the world of more traditionally diversified PE funds, consider Journey, an acquisitive “multidimentional design” brand led by Andy Zimmerman (former CEO of frog design) and backed by Growth Catalyst Partners. Launched in 2022 with the acquisition of ICRAVE (interior environment design) and Squint/Opera (immersive content creation), Journey has at the end of 2024 announced the acquisition of two more studios, 59 (experiential) and VMI Studios (creative technology), adding up 250 employees in total globally. As Zimmerman put it in the firm’s announcement, “We can literally and figuratively design the theater and create the show.” This is another great example of bold deployment of PE capital into new models and platforms through the hands of proven executive management.

How to Spot an Ideal PE Partner

Every deal has its own story, but after working at and observing creative businesses navigate various PE partnerships, I've learned to spot certain signals that tend to predict success -- or trouble. The right partner reveals themselves in how they approach your first conversations.

A PE firm that truly understands creative businesses will start by exploring your culture. They'll ask thoughtful questions about your creative process, demonstrate genuine curiosity about your team structure, and show real interest in your agency's origin story. More tellingly, they'll reference specific examples of how they've preserved and enhanced creative cultures in their portfolio companies.

Their approach to growth discussions is equally revealing. Rather than presenting generic hockey-stick projections, strong partners arrive with realistic, well-researched growth scenarios. They'll talk about specific synergies with their portfolio companies and demonstrate a nuanced understanding of your market position. Most importantly, they'll lead with investment plans - in capabilities, in talent, in technology - rather than cost-cutting opportunities.

Track record matters enormously. The best partners will have relevant creative services companies in their portfolio and will proactively offer introductions to agency leaders they've backed. They can point to successful exits in related sectors and demonstrate long-term relationships with their portfolio companies.

Conversely, watch carefully for warning signs. A PE firm that dismisses the importance of creative processes, focuses exclusively on financial metrics, or shows little interest in talent retention likely doesn't understand our industry. Be particularly wary of those who default to manufacturing or retail analogies - they're telling you about their comfort zone, and it's not creative services.

Short-term thinking reveals itself quickly. If conversations immediately jump to cost-cutting opportunities, push for unrealistic growth targets, or present cookie-cutter integration playbooks, you're probably talking to the wrong partner. Similarly, if they can't demonstrate understanding of project economics or lack appreciation for talent management, they're unlikely to help you build sustainable value.

These signals rarely appear in isolation. A PE firm might show a mix of both positive and negative signals, so carefully balance the evidence. The key is to understand which signals matter most for your specific situation.

The most telling signal: watch how potential PE partners react when you raise concerns about creative independence, talent retention, or long-term investment needs. Their responses -- both what they say and how they say it -- will tell you volumes about what life might be like post-deal.

The Bottom Line

Private equity isn't the answer for every agency or any situation. But if you're looking for a path to scale your business while maintaining its creative soul, today's PE landscape offers more opportunities than you might realize. The key is finding a partner who sees your agency's unique value and has a track record of growing, not just optimizing, creative businesses.

Remember, you're not just selling your agency. You're choosing a growth partner. Take the time to find one who shares your vision for what your agency can become.