In a Bid to Strengthen Its Independence, Barkley Buys Back All of Its Stock
Former employees held a majority of shares in the agency
One of the benefits of being part of an independent agency—or any agency, for that matter—is the opportunity to become a shareholder. Whether shares are earned, gifted or bought, when growth happens, a piece of ownership means getting part of the windfall.
While Kansas City independent Barkley found the benefit of shares in the company to be a massive plus in recruiting and retaining talent, the agency realized there was an imbalance in its setup. At issue is the revelation that there were more shares held outside of the company. In a bid to retain control and shift the balance back to Barkley, the company has begun buying back shares.
"A few years ago, the board looked at it and noticed that we were going down two paths," said Jeff King, CEO of Barkley which counts Dairy Queen, Big Brothers Big Sister of America, Planet Fitness and others as clients. "One, we were continuing to run the company in such a way that we're growing and creating a return for everybody who's a shareholder. But on a parallel path, the board was looking at what the right model is for the future."
Essentially, what was discovered was that former employees of the agency, founded in 1964, and now with offices in Kansas City, Pittsburgh and Boulder, held a majority of shares in the company. While the first goal, according to King, is to provide the best return for shareholders, the heavier weight of ownership by those who may be employees of competing agencies wasn't the right setup moving forward.
"The board looks at it as to whether or not it's the right ownership model for the company now and into the future," he said, estimating that, in general terms, there are a few hundred outstanding shares. "That's where the disparity between the internal shares and the external shares begs the question of whether or not it's the right benefit for attracting and retaining the best talent and preserving the strong culture that we have."
Shares in the company are administered via what's called an ESOP (all employee share ownership plan) that was established for Barkley in 1997, when Sonic accounted for a majority of the agency's business. A tax-efficient retirement vehicle, the original setup at the agency allowed for participants, even after leaving the company, to hold on to their stock. King noted that the agency has performed well over the past 10 years and there "wasn't a lot of motivation for people to exit" the plan.
The new setup of the agency's ownership structure includes a stipulation that, when a shareholder leaves the company, the shares stay with Barkley.
"Our company has been around for 55 years, and this is only the second ownership change in its entire history," King said.
The buyback is not a small investment and one that the management team was willing to make, in addition to a favorable lending environment that allowed the plan to happen. In King's mind, it not only solidifies the agency's position but allows it to be competitive when recruiting talent.
"This is a talent business, and the agencies with the best talent are the ones that win," he said. "We wanted a model that we felt would preserve what we think is a really strong culture at Barkley and one that would give us the flexibility, tools and incentives that we need to continue attracting and retaining the best talent in the industry."
As seen in Adweek and written by Doug Zanger.