“F*** THAT S***, THERE HAS to be another way”. There really is. The story behind the OK COOL and Residence deal.
In case you missed it, one of the biggest deals in social/influencer made headlines in the last week of January. OK COOL, one of the world’s most creative social agencies, sold to creative powerhouse Residence, a US group with recent PE backing. Remember that name, as we’re going to see much more of it in the coming years.
Here’s the back story of how each party did their bit to get this ground-breaking deal over the line in record speed.
And let’s not forget that deal-making can throw up some fun moments along the way. How often is an agency CFO mistaken for a new creator…..which is what happened, in no small part because of his striking look, when Wade Milne first visited OK COOL’S London office!
The perfect seller
Coaching a sell-side agency leadership team to figure out what they want from a deal can often be a large part of an M&A adviser’s remit. None of this was needed with OK COOL; they had absolute clarity around vision and opportunity, the things that make them unique, their non-negotiables, and the future they wanted.
Immense self-belief is a hallmark of the OK COOL brand; what they do, who they choose to do it for and how they do it. Rather than arrogance, it signals unwavering confidence in their strategy, quality of work, culture, team and market value. And importantly, they were assured enough to know that if a sale were to elude them in the here and now, they would secure the right deal in the future.
By the time OK COOL and Residence met in Cannes – how appropriate for two incredibly creative businesses – each had done much of the ground work to deliver a value-generating deal.
The alignment of culture and chemistry was undeniable, but it was OK COOL’s clarity in knowing that Residence really matched the brief they’d set themselves, that truly set this deal apart. Equally Residence knew exactly how it would judge the creative credentials of agencies it looked at.
For us as advisers, it meant we could cut to the chase and focus on making this deal the best it could possibly be, working collaboratively with Residence recognising the rigour required and how much was at stake for them in completing this first acquisition with a newly installed PE partner.
The art and craft of M&A
Too many sellers wander around the market having unstructured conversations, or enter auction processes without really working out what they want. A failure to deliver on objectives, including getting a deal across the line – now or at some point in the future – shouldn’t really come as a surprise, although too many agency leaders are caught off guard.
OK COOL were approached by several groups over the years and entertained many off-market conversations, but they were very deliberate about meeting people to test fit and chemistry to understand what a great partner would look and feel like. Waypoint were only brought in as M&A advisers when they found that partner. This groundwork meant that from the first offer landing to process completion happened in just 14 weeks.
It’s at this point that the value of a strong M&A process with advisers who understand the subtleties and human aspects of deal-making as well as the rigours of detailed process and investment returns comes to the fore. It involves pushing people where they can be pushed, testing boundaries and bringing a smart negotiating brain to bear.
This needs to be combined with a deep understanding of the industry to know what constitutes value and how and where it can be unlocked, as well as potential barriers.
In the case of OK COOL, while they came to us thinking the deal was pretty much there, we were able to show them that there was even more value to drive for both parties in ways they’d never considered. More importantly, it meant knowing how to make sure this deal actually happened, and in the shape that everyone had bought into from the outset.
Experience teaches you which fights you can win and those where it’s not worth engaging. An adviser who does a transaction every now and then or doesn’t have deep sector expertise simply doesn’t understand the deal landscape well enough to do this effectively; it simply makes them proficient at a deal process. Sellers need to know that their M&A partner has a truly deep understanding of sector dynamics, earned through multiple transactions. This equips them to spot and navigate potential pitfalls and know how value can be unlocked, all of which varies from sector to sector.
Why Residence wanted in on social/influencer
In a world that favours better, faster, cheaper, Residence and OK COOL both share a laser focus on the art and craft of creativity.
It’s an approach that has been working brilliantly for OK COOL. Reference to cultural relevancy is today’s hot currency, but for the agency it was a founding principle and ambition to bring brands close to culture. Strategy-heavy briefs, for the right type of clients, paired with a team built specifically around understanding sub cultures, and trend spotting tech has driven OK COOL’s success. It’s seen them conquer the US, win big brand clients and grow consistently while keeping their cool, their edge and their guiding purpose.
For sure, social/influencer is still earning its spurs creatively, but some of the hottest agency brands are giving traditional ad shops a run for their money. New agencies form and scale at the pace of the cultural zeitgeist they harness and reflect, and fame comes to them and to their work quickly, making this part of the industry especially exciting, dynamic and fast growing.
We’re seeing profit levels doubling or even tripling in just a couple of years. The best agencies are flying not only because they’re winning business through their own efforts but because every type of creative agency is moving into social-first creative, driving up quality and perception.
Where next for social and influencer?
Social and influencer is still on a massive growth curve as more of the CMO budget is directed its way and as pressure is ramping up to get serious about measurement and ROI. Any sense that it’s a young, immature market is quickly disappearing and 100 person agencies are now the norm not the exception.
Consolidation continues apace, so much so that we’ll take a punt that by the end of 2026 none of the leading London-based social agencies will be truly independent anymore. They’ll either have taken PE funding or been bought. The creator economy is a melting pot for many major industry sectors – the collision of brand, entertainment and talent. There’s more and more happening at this intersection, and we expect some really interesting deals to emerge. Equally, some of the networks will also continue to prosper in this space.
Great deal making – people really do count
Residence has a strong sense of purpose and identity with a leadership team fearless in doing things differently. That anti-establishment attitude now has serious backing via recent PE investment from Gemspring. Seeing how much we know Residence enjoyed completing their first acquisition post PE backing, we’re expecting to see them doing more M&A in their creative heartland in the coming months and years.
Human connection is a critical part of deal-making. Whilst every sell-side advisor and buyer (plus investor) will have some tough conversations and consistently test each other along the way, building trust and respect early allows for greater collaboration and better outcomes.
Another key aspect of great deal-making is knowing how to understand the personalities involved, working out who has what conversations and ensuring all of those conversations run and lead to an outcome that everyone is happy with. That orchestration role played by a skilled M&A adviser is something we’ll cover in a future post.
