An Entrepreneurial Spirit
Founded in early 2020, Vantage Insurance Partners is an insurance investment firm backed by DFW Capital Partners that aims to acquire majority positions in retail agencies, managing general agencies, wholesalers, and specialty insurance-related companies nationwide.
The Vantage model allows sellers to retain direct equity ownership and share in future profits of their firm, while providing for a flexible succession plan for the next generation of owners. Leader’s Edge caught up with Alex Panlilio to discuss the current M&A environment and Vantage’s long-term plan in the insurance distribution market.
My view on succession is that it’s in the back of every entrepreneur’s mind, whether they have sold their business or not, but there’s no silver bullet for it. However, if you ask an entrepreneur when they plan to retire, an honest answer would be, “I don’t know.” The right partner for us isn’t “for sale,” because they’re saying “I don’t know.” But they’re thinking about it. They don’t want to quit tomorrow, but they also don’t want to wait until they’re 80 years old to start thinking about liquidity. And what they do know is that they like their business, they like running it every day, and they want to keep growing it. So we try to address entrepreneurial succession in a more directly aligned and longer-term horizon that has a lot of built-in flexibility. If life changes and they need out in the near term, we’re able to properly address it. Or if they want out in 10 years, they could sell portions of their equity along the way.
Essentially, our business model does not force people to have an exit discussion today. Rather, it gives them a vehicle to properly plan out succession while providing them with full transparency and direction toward liquidity, over five, 10, 15, 20 years, when they cross certain bridges with more experiential data and clarity to make those big life and career decisions.
Those figures result in Vantage buying a majority equity position in their business, which then allows us to help our partners through the financing of subsequent add-on acquisitions into their firms (which they still run and own equity in). That’s the main aspect of how we are able to extend our capital and financial capabilities directly with our partners in an aligned fashion to increase equity value.
But the true measuring stick for us is captured in what is actually retained by our partners. I don’t think about it as we bought 55% to 85%. It’s more like, did we leave 15% to 45% in the hands of those driving the bus? Because the folks driving the bus need to feel like they still personally have significant equity in the game. If somebody with a $3 million EBITDA firm has 5% of the business, they’re still technically an owner, but do they really feel like an owner? [But] if they still have 30% of the business in their hands, they do feel and act like an owner. Essentially, our goal is to have entrepreneurs indefinitely feel and act like true entrepreneurs throughout the life of our partnership together.
The common denominator in what we’re looking for in the culture of a potential partner is an entrepreneurial environment that can be sustained, as we scale and grow the business over time. Essentially, we are not driving the culture; rather, we are gravitating toward and choosing to partner with an entrepreneurial culture that has an “institutionalized” aspect to it. Meaning, these firms already know what they’re doing. They have their sales and service processes figured out and have appropriate operational standards in place.
For the owners/senior management of these firms, maintaining and sustaining their culture—really their legacy—is pinnacle. So by recognizing and acknowledging who and what they are as a firm, we don’t intend or want to change the culture at all because that culture has been a driving force of what’s made them successful to this point. I think the only way to sustain that success indefinitely into the future is to have our partners maintain a direct economic alignment with us in their business over the short, medium and long term.
Vantage is going to be a multi-platform company in the insurance distribution market. We’re partnering with the best entrepreneurial firms that are great at what they do and have leadership with a longer-term mindset toward growth. All of our partner firms are performing very well in their respective segments, and we’re supplementing their ability to grow in and beyond that segment.
Over time, our partners will find ways to work together on both the revenue and operational side of their respective businesses, and a natural cohesion will start to form among our platform firms. From my prior first-hand experiences in more established and tenured firms in our industry, I believe that it takes at least 12 to 15+ years for a more proactive integration strategy to make sense from an operational perspective. So perhaps there is a future where Vantage becomes more integrated as a firm under that horizon, but for now we are solely focused on finding platform partners that have found business success in the past and are open-minded on ways to accelerate that success in the future with the right partner.