Spectrum Science, a 2022 MM+M Agency 100 honoree, has partnered with private equity (PE) group Knox Lane, the firm said Tuesday, as the agency pivots from debt financing to PE to fuel growth.
Owner Jonathan Wilson will continue in his role of CEO and as an executive board member. Each member of Spectrum’s leadership team remains a minority shareholder in the agency, with Wilson retaining the largest stake.
“I’d had lots of people approach me over the last four years, wanting to either buy us in our entirety or do [investment] deals,” said Wilson. “We believe the time is right.”
After revenue spiked by 49% to $48.9 million in 2021, Spectrum grew significantly again in 2022. All-in revenue (from acquisitions and its core business) reached $80 million, a 64% increase, with its staff count growing from 181 to 310, Wilson said.
The agency also secured its first three acquisitions last year, snapping up U.K. shop Aurora Healthcare Communications, along with other agencies in the This is Avalon Group umbrella. They’re now housed under the Global Health Marketing & Communications banner, which Spectrum founded and chairs. That followed two other additions, Sonic Health and The Seismic Collaborative.
Monroe Capital provided debt financing to help fund the three deals. Going forward, San Francisco-based Knox Lane will provide support from a growth equity perspective. Wilson said he was attracted to Knox Lane because of its hands-off approach to operations.
“Through this process, I did not want an operating partner and a shadow CEO,” he said. “I wanted to still be leading the strategic direction of the company. I see Knox Lane as a strategic partner to help look at different [deals] that we may want to do.”
Wilson’s vision for Spectrum involves continuing to build out its medical and scientific communications arm, one which encompasses PR, advertising, public affairs, digital and social media. He said he also seeks to grow its nascent clinical trial recruitment business and conduct more work in medical affairs.
“We see potential to acquire companies within that medical affairs space, and in particular market access,” Wilson added. “Market access and understanding the value-storytelling is going to become more and more important for us. As [clients] continue to develop therapies that are for smaller and smaller patient populations, more rare disease, more expensive therapies, it will be more important to tell that holistic story that surrounds the value of communications.”
To build off last year’s Aurora acquisition, the CEO also anticipates more U.K/European M&A activity in creative services, med-comms and market access.
“What we’re looking to do is mirror the capabilities we have here in the U.S. from a European perspective,” Wilson explained.
Given Knox Lane’s well-publicized PE partnership with Fingerpaint, the question naturally arose as to whether a merger of equals could be in the offing. Wilson put that question to rest.
“It is not,” he said, of whether an FP-Spectrum combination may be in the works. “We see our business as being its own platform and there’s absolutely no plan – and no possibility of that happening at all, with the way we structured the deal.”
He did say that any acquisitions will likely dovetail with the aforementioned strategy, not just be for the sake of service breadth. “We’re not going to go out like some have and acquire whatever they can, [where] it’s like building a beast. We want to be very laser-focused on what we look to acquire.
‘The strategy for many has been eating up as much EBITDA as they can,” he continued. “I’m not interested in that. I’m interested in building what’s right for us and what’s right for our clients.”
Taking on a PE partner is generally considered an on-ramp to M&A, a narrative that continued in 2022 with agencies making PE-backed acquisitions. That included Fingerpaint, which snapped up Parsons Medical Communications, marking its sixth acquisition since aligning with Knox Lane in December 2020. That followed the addition of multicultural agency Emcay in July.
Knox Lane was unavailable for comment at press time.