Brokerage Ops Industry the May 2016 issue

Don’t Wait for the Cross-Court Pass

Like ballers who don’t play defense, buyers who don’t put the time in with sellers, often don’t get the deal.
By Phil Trem Posted on May 2, 2016

This guy didn’t want to put the time in to get the ball; he just wanted to make the shot. But it usually backfired. It’s similar in M&A.

The best advice I can give to a firm looking to improve its odds in closing transactions is to be around, consistently. Sellers often chose a buyer who is familiar to them. Many times we have seen one buyer chosen over another who may be a better fit because the first buyer developed a rapport with the seller that provided a sense of comfort. So the goal should be to build comfort with potential sellers. It should not be to “sell” them on why you are the best partner for them….and then never call them back again. 

As I’ve said before, buyers need to treat their M&A pipeline like any prospecting list: make contact, be visible, come back after initial contact. Leave one meeting with a reason to stop in again. When you invest in the relationship, you significantly improve your odds of winning.

Buyers also need to be prepared to answer questions that reduce seller apprehension. This can be done over time or in a first meeting, but your ability to provide clarity and insight allows the seller to get answers and improve comfort level. Consider the following potential seller concerns:


  • What is your long-term strategy for our firm? If we sell to you tomorrow are you going to turn around and sell us again?
  • What is the culture of your firm?
  • What are your growth priorities? Are they business line specific? Niche specific?
  • Do you have a defined organization chart of senior management that we plug into?  What is the perpetuation plan for senior management at your firm?

Back Office Integration

  • What happens to accounting, technology and human resources?
  • Do we have to convert our agency management system?  How quickly?
  • What happens to licensing and carrier contracts?
  • Do we get credit for enhanced contingents?
  • Are you going to hit us with an overhead allocation?


  • How do I get better as a result of our partnership?
  • What are your top 20 markets?
  •  Can you help me find new producers? Training capabilities?
  • Will we get access to line of business or niche specialists?

Reporting Structure

  • Do we have autonomy?
  • I haven’t had a boss in 30 years. Who do I report to going forward?
  • What are the expectations for our producers? Who sets their goals?


  • Will senior leaders get employment agreements?
  • How are producers compensated?
  • Will there be a staff incentive bonus plan?
  • What are the travel and entertainment policies?
  • Is there a commitment to retain our staff?

Deal Consideration and Structure

  • Can we keep our name?
  • Can we reinvest into your firm? Is it a requirement?
  • Is there an earnout? Is it based on revenue or profit growth?
  • How are subsequent fold-ins treated?

Contracts and Covenants

  • What do the non-compete and non-solicitation provisions look like?
  • Is there a mandatory retirement age?
  • What are my trailing liabilities?

While this list seems extensive, it is really just the tip of the iceberg. Most successful buyers can answer these questions or highlight the positives in an ongoing dialogue. So put the time in, be prepared, be present and build comfort with potential sellers. The rest will likely work itself out. 

Market Update

March was a very strong month, posting 40 transactions and bringing our three-month total to 98 deals. This is the second highest first quarter total in the past 10 years, trailing only 2015 which had 119 transactions. Activity and momentum appear to be surging into the spring and summer.

AssuredPartners continues its torrid acquisition pace, announcing five transactions in March and bringing its 2016 year-to-date total to 11 deals. Hub International completed three deals in March and has eight total announced U.S.-based transactions. Arthur J. Gallagher wraps up the top three with four announcements in March and a total of six deals. USI Holdings closed two deals in March but has a total of five announced transactions in the first three months of 2016. USI closed only six total deals in 2015, so its early activity this year is a significant increase. Rounding out the top five buyers year to date in 2016 are The Hilb Group, Confie Seguros, and Acrisure each with three announced transactions. 

A total of 43 transactions were completed by private-equity backed brokers representing approximately 44% of the activity through March. In total, 60 different firms have made at least one acquisition with only 12 completing more than one. Those 12 firms have announced 51 deals or 52% of the total activity. 

Activity in the market continues to be very robust. There are still no signs of slowing or of multiples fading. The summer months will be telling, but it looks like 400 deals is a real possibility again in 2016.

Phil Trem President of Financial Advisory, MarshBerry Read More

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