How intermediaries can help you get the right deal By Sam Patterson
Today’s insurance mergers and acquisitions (M&A) market is a very competitive environment with private equity groups, aggregators and national agency buyers dropping into the smaller market segment to capture increased market share and leverage their critical mass. Finding your way through the complex M&A process can be as difficult as cutting through the thicket of a jungle. Amidst the dense vegetation are hidden dangers and unique obstacles that can quickly lead to trouble. But navigating what is to you, uncultivated land, can be much smoother and safer with the help of a knowledgeable and experienced third party — a Mergers and Acquisition advisor.
The M&A arena is bustling with activity which is likely to increase over the next several years. The average insurance business owner is approaching 60 years old and operating a company with average commission revenue in the $1 million range. Three quarters of the total agency ownership base intends to retire or transfer their company in the next seven to ten years. When viewed across all types of insurance agencies, including commercial, employee benefits, LTC, life, bonds, individual, E&S, GA’s, captives and others these owners total over 400,000 in the United States. The traditional independent agency commercial subgroup of this population is only about 10% of that total number. Even though there has been aggressive acquisition activities taking place for years, the total number of agencies, including independents is larger than ever.
The process is complicated by the fact that only 10 percent of agent and broker acquisitions made are publically known prior to close. So even when sellers want to sell, they aren’t likely to openly communicate their desire due to the fear of information leaking and increased competition that can destroy the company before there is a chance to sell.
Regardless of which side of the fence you’re on — trying to seek or attract acquisition opportunities — making your way through the process with a qualified and experienced M&A advisor offers some excellent benefits that can help ensure a favorable outcome for both parties. Below are the three key reasons why you should consider utilizing M&A advisor.