Brokerage Ops the April 2019 issue

You Own the Business—So Deal!

If a deal “feels right,” shop around.
By Phil Trem Posted on March 27, 2019

Today, owners of insurance brokerages field countless inquiries from prospective buyers wanting to know if they’d consider selling: Isn’t now the ideal time? Why wouldn’t you take advantage of the record-high valuations? Do you think your agency will be worth this much if you wait? How about a meeting?

Then for some reason or another, one of those assertive inquiries pushes a button—a go button. The owner agrees to meet this buyer (a large regional brokerage, a private equity player, you name it). Just one meeting can’t hurt. Why not?

The meeting happens over lunch. Then, lunch turns into golf, followed by more social time and a grand finale of the owner saying, “This feels right.”

The deal moves forward with the owner agreeing to sell the business because there was never a better match. This. Feels. Different. Rather than enlisting an advisor to help vet the deal—or even “shopping around” and considering other offers—the owner basically hands the keys, driver’s seat and wheel to the buyer, who steers the deal to close.

Avoid reactively taking a buyer’s call and meeting. You set the ground rules.

Who actually won in this scenario? Who really got “the deal” and the dream? Was it the owner, who was convinced this buyer felt different just because? Or the buyer who’s clearly a master in the art of mergers, acquisitions and deal closing? After the owner spent years investing in the business, nurturing its talent and beating market challenges, will he actually walk away feeling it was all worth it in the end?

Rewind to the Initial Call

Let’s replay this scene and go back to the phone call when the owner decided, “Sure, why not. I’ll meet you.” What if the owner then reached out to an advisor and shared that the tide had turned on the initial plan to hold on to the business; a sale sounds interesting. The obvious next step would be to consider other buyers, other offers. Find out if the deal this prospective buyer is offering is the best one. Is this buyer actually different?

We’re taught to always get three estimates before hiring a contractor to work on our homes. Shop your vendors to see if you can get a better deal on your cable, phone service, etc. We look for the best prices on office supplies. Why pay $5 more for ink toner at one place if you can get it for less elsewhere?

You get a deal only when you conduct the due diligence to learn whether there is a better offer.

But what’s interesting is we’ve seen a number of owners make the mistake of accepting a meeting on a whim based on “a feeling.” Then after hearing the buyer’s story—and telling the story is an art that talented, successful buyers have—the owner decides this genuine offer is ideal. There’s nothing like it.

But how do you know unless you vet the options? For owners who decide to entertain a meeting, to listen to the story, to learn more about an offer, why not meet with several other prospects so you can leverage the true value of what may be your greatest asset?

Own the Process

In today’s active M&A market, with high multiples and valuations that most agencies never imagined could be a reality for their business, it makes sense that owners who always figured they’d perpetuate are considering the alternative. And there is nothing wrong with that.

But stay in the driver’s seat. You are the owner. Avoid reactively taking a buyer’s call and meeting. You set the ground rules. What do you want to find out about the buyer? You ask the questions. You take the lead. It’s your business; you own it. Own the process.

If you decide to sell your greatest asset, you owe it to yourself, your people and your future to engage in a thoughtful process so you can make the most of the market opportunity. So if a buyer calls and a meeting sounds intriguing, say, “Let me think about that.” Then, get a true process started so you can guide the deal in an advantageous direction.

Market Update

Deal activity in February produced 34 more announced transactions, bringing the year’s total through February to 102 deals. This is a 13% increase in announced transactions compared to the same time period in 2018 (90 transactions), with press releases continuing to lag behind. There is no suppression of the appetite for acquisition among buyers, and they continue to be as active as ever.

Patriot Growth Insurance Services remains the most active buyer year to date and added one more transaction in February, bringing it to 19 deals. Rounding out the top three buyers through February are AssuredPartners and Arthur J. Gallagher, which have announced seven and six transactions, respectively.

Valhalla, New York-based USI Insurance Services announced in February it is acquiring U.S. Risk Insurance Group, which it expects to close on in the second quarter of 2019. This acquisition greatly bolsters USI’s presence within the wholesale market and is its first venture that provides a presence outside of the United States. Another notable transaction in February was Patriot’s acquisition of Turner Insurance & Bonding Company. This is Patriot’s first acquisition that includes property and casualty business

Securities offered through MarshBerry Capital, member FINRA and SIPC. Send M&A announcements to M&

Phil Trem President of Financial Advisory, MarshBerry Read More

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