Indie Agency Chemistry Takes Majority PE Investment

Atlanta-based Chemistry is the latest independent agency to receive private equity investment. Chemistry has received a slight majority stake from Breakwater Management, the companies told ADWEEK exclusively. Terms of the deal were not disclosed. 

The full-service agency will retain its leadership team and use the funds to scale its services by investing in talent and technology, and through strategic M&A. Chemistry employs 170 people with offices in Atlanta, New York, Pittsburgh, and Miami. Its clients include Netflix, the NBA, and Comcast. 

The 18-year-old agency began thinking about its future when it saw the trend of private equity investments in agencies start to pick up in the last few years. 

“The competitive landscape for us is shifting,” said Ned Show, CEO of Chemistry. “Other independents at scale are taking on financial partners. They’re fueling their growth. We felt like it was a moment in time when we needed to think about that in a way that, maybe, we wouldn’t have five years ago.”

Chemistry organically built a full-service offering across creative, digital, production, and media over the past two decades. The agency was looking for the backing and financial acumen to accelerate its growth as its peers in the industry scaled up. 

“We weren’t really interested in standing on the shoulders of giants and doing the holding company thing. That didn’t really appeal to us,” said Tim Smith, president at Chemistry. “But we kind of felt like we had a box of eight crayons, and everybody else was playing with the 64 box with the sharpener.” 

When the agency began speaking to PE backers, Los Angeles-based Breakwater Management stood out for its focus on media, entertainment, and marketing services. Smith said that Breakwater Management also understood the importance of preserving agency culture. 

With other potential PE partners, “all they want to know is, what widget is it that you are going to sell? They don’t understand culture,” Smith said. “With Breakwater, they know the culture is a driving force in this thing.”

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In addition to a diverse set of clients and services, Chemistry was an appealing investment because of its strong growth, client retention numbers, and pitch win rates, said Eric Beckman, chairman and managing partner at Breakwater Management.

“They’ve seen what others have done, and candidly, the path is open for them also to grow organically and through acquisitions,” he said. 

As Chemistry scales, it will focus on investing in talent and expanding to the West Coast. It will also focus on growing areas like social media, multicultural marketing, production, and technology.  

“This is a human capital business. The people with the best talent win,” said Show. “We want to be the place where people build their career.”

The PE-backed agency wave

Chemistry follows a spate of independent agencies that have recently taken investment from or been acquired by PE firms like BarkleyOKRP, Huge, and R/GA. 

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Agencies are increasingly turning to PE backers to scale as an alternative route to selling to the big holding companies—and finding success.

“There’s not many great stories about, ‘We joined a holding company. It turned out fantastic.’ It just doesn’t happen,” said Smith. “But all the folks that we talked to [who sold to PE] were like, ‘We are enjoying this. This is working for us. It’s giving us options.’”   

Show added that Chemistry was looking to accelerate its growth, whereas holding companies are often about “the art of subtraction.”

“How can we build efficiencies across our media department? How can we do the creative in a different part of the world, because we can save 17 cents doing it there?’” he said. “We weren’t interested in a bunch of accountants trying to make $1 to $1.05. We’re trying to build something at scale.”