EBITDA Multiples and Valuations for Marketing and Communications Agencies in Q1 2023

Marketing agencies are feeling the effects of larger macroeconomic and M&A market trends in 2023, with fewer deals closing and higher costs of capital. However, agencies serving niches such as esports, gaming, pharma and healthcare as well as many others are still able to get deals done. In this post, we provide context on the current M&A environment for marketing agency owners looking to sell their marketing agency and share EBITDA multiples and valuation data for Q1 2023.

M&A Market for Marketing & Communications Agencies in 2023

Marketing agencies have been hit by the market downturn, with fewer deals closing per quarter, and fewer prospective buyers bidding on companies. However, the deals that are taking place are not seeing lower valuations, as agencies have exhibited resilience through two major events in the past three years. PE firms engaged in marketing M&A and strategic acquirers involved in marketing agency mergers are also not backing out of deals any more than they were a year ago, this is due to a couple of factors, but one important one is for acquirers to retain a good reputation for completing deals. Some agencies new to M&A can gain a reputation for being window shoppers or pulling out of offers without closing any deals.

EBITDA Multiples for Marketing Agencies

The following table provides the average EBITDA multiples being paid for marketing agencies in 2023, segmented by company type and EBITDA range.

Valuation for Marketing Agency Owners

EBITDA multiples are not the only way acquirers are valuing agencies, with Seller’s Discretionary Earnings (SDE) being common, especially in the US and on the lower end of the EBITDA spectrum. An M&A advisor can proactively put forward other valuation models to get a better valuation, which is one of the many reasons our clients who list on Agencies.co still hire our M&A team to prep their agency for sale and to run a formal process.

Marketing agency owners wanting to sell their agency often price their agency based on multiples they can find in the public domain based on mergers and acquisitions of larger agencies. This creates a much higher valuation than is realistic in the marketplace, the upshot being that these agencies will never sell, even on an open marketplace like Agencies.co where there are thousands of buyers viewing a listing each month.

It’s important for sellers to have a realistic valuation for their marketing and communications agency which is based on data for actual closed transactions that are available to M&A advisories using research from their team members. A valuation for your agency is part of the formal process the Agencies.co M&A team provides as part of our Preparation for Sale package.

Closing Thoughts on Marketing Agency Multiples

Most agencies that sell for the top end of the EBITDA multiple range (8-12) are represented by M&A advisory firms. The best outcomes for marketing agency owners are tied to a formal deal process that brings multiple potential acquirers to the table, as deals on the low end of the spectrum often occur when agency owners respond to cold outreach from strategic agency acquirers or PE firms and don’t hire an advisor.