Industry the March 2017 issue

Give Them Their Due

When you trust the firm on the other side of the table, you can be tempted to just shake on it.
By Phil Trem Posted on February 27, 2017

It’s the agency owner you met at a conference and clicked with over cocktails, the one you enjoy catching up with at networking events. It’s the industry mentor who runs a larger organization and willingly shares benchmarking information. It’s the business owner who runs a firm similar to yours in a different region.

Our comfort zone is where valuable connections are born because we can let our guard down. Over time, relationships cultivate trust. A conversation in one meeting may turn into a business deal five years down the road. By investing in relationships we are also creating pathways for business development.

Relationships are key. But due diligence is equally important. Just because a comfort-zone agency offers to buy your business does not mean that’s the best offer. Perhaps this agency is a match—you are confident in the owner and the firm’s track record. But is that enough to close a deal?

Due diligence that is completed in a thoughtful, collaborative manner can actually advance a relationship and create even more trust between two organizations. Just as you spend the time to nurture a relationship, you should dedicate the time to thoroughly vet any deal before finalizing an agreement. It’s the right thing to do for you and for the colleague you respect.

When we analyze the behaviors of top-performing agencies and the best practices they follow to guide their success, we have seen that one of those habits is staying focused on strategy. It’s easy to get sidetracked by an appealing offer or promising deal, especially if the other firm is an organization we know and trust. Still, we believe it’s critical to step back and return to the basics. There is no fast lane for growing an agency. There are no shortcuts for vetting a deal to ensure an offer will deliver the value expected.

Spend time honing relationships with industry peers—develop your comfort zone. And, when the time comes to get down to business, take the time to honor that deal and relationship by vetting it thoroughly and even consulting with a third party to be sure your vision has clarity.

There are no shortcuts for vetting a deal to ensure an offer will deliver the value expected.

Market Update

Deal announcements in January 2017 were down from year-end December 2016, a typical “hangover” effect following the flurry of year-end activity. However, the fall-off this year was greater than normal, with only 33 announced transactions in January compared to 59 in December (down 30% versus the normal seasonal drop of 7%).

Arthur J. Gallagher & Co. announced five transactions in January, nearly one quarter of the company’s total announcements from all of 2016 (23). Jardine Lloyd Thompson Group and Lake Michigan Credit Union each announced two acquisitions during the month. Independent agencies (those not backed by private equity) were the most active buyer group in January, representing nearly 40% of announcements (13 of 33) after representing only 24% of total deal activity during 2016. Public brokerages were also more active in January, representing 24% of January announcements after just 7% in 2016. The 2016 December hangover must have hit private-equity backed brokerages the hardest. This segment announced only six deals in January (18%) after announcing 45 of December’s 59 total deals (77%).

Notably this month, the middle-market subsidiary of Marsh & McLennan Companies, Marsh & McLennan Agency, announced the signing of its definitive agreement to purchase J. Smith Lanier & Co. Founded in 1868, JSL had annual revenues of approximately $130 million, across 21 offices with 600 employees.

Trem is SVP, March, Berry & Co.

Phil Trem President of Financial Advisory, MarshBerry Read More

More in Industry

Challenges and Opportunities Ahead
Industry Challenges and Opportunities Ahead
Considering the future of The Council and the industry as I take the reins as CE...
Industry Make a Simple, Powerful Statement on Belonging
Meet people where they are and how they want to be called.
Digital Focus Drives Growth 
Industry Digital Focus Drives Growth 
Q&A with Guy Goldstein, CEO and Co-Founder, Next Insurance