Mergers & Acquisitions Made Easy with Your Strategic Advisory Director

There’s no doubt that mergers and acquisitions are a booming trend right now. Every day, agencies purchase other agencies; large insurers buy out agencies, brokerages merge together to form a united front against larger companies with more resources … and the list goes on. Everyone is looking for a way to increase their market share.

As an independent agent or broker, you need to be prepared for possible mergers and acquisitions activity. You may be thinking to yourself, “I’m not going to sell my agency,” or “I don’t plan on merging with any other agencies,” but you never know when an offer comes along that may be too good to pass up. But will you know what to do when an offer is made?

Chances are, you are too busy servicing your clients and taking care of your employees to worry about the potential sale or merge of your business to another company. It would be foolish, however, to let these opportunities go by sight unseen. If you are not capable of evaluating mergers and acquisitions activity yourself, you should make it a point to employ someone who will.

I suggest you add a Mergers & Acquisitions expert to your Strategic Advisory Board (IJ West, May 17). Working together with your Carrier Relations expert, your Agency Growth expert, and your Legal/Tax Advice expert, your Mergers & Acquisitions expert will assist you in making the proper decisions for your agency.

An unsolicited offer
Consider these scenarios: You receive an unsolicited offer to purchase your agency or brokerage. This can come in many ways. The company, which is often times a bank, brokerage, insurer or other type of financial institution, will look up your company’s Web site (you do have one, don’t you?) and then simply compose a letter addressed to you stating that they are looking to expand into your part of the country; thus, they would like to purchase your agency.

So now you’ve got a letter on your desk from a company offering to buy your agency. I’ve seen many an agent in this situation and their first reaction, usually, is to panic! The realization hits them that they don’t have updated valuations of what their agency is worth, or they haven’t kept up-to-date on how much businesses are going for.

I’ve seen situations where the owner couldn’t even find the lease for his agency. Even worse, many agent owners are not even aware of who is out buying their competitors’ agencies.

This is where your Mergers & Acquisitions Strategic Advisor would step in, armed with the updated agency valuations you thought you didn’t have, as well as research on the current mergers and acquisitions activity going on in the marketplace today. He or she will be able to review any potential sales or purchases, and then negotiate the best deal. In essence, the Mergers & Acquisitions Strategic Advisor will be your facilitator—he or she will negotiate the deal that’s best for you and your agency, while you are free to do what you do best—sell policies!

Maybe another agency has approached yours and wants to enter into a merger agreement. Both agencies combined will allow you to offer more products to your customers—and you too will reap the benefits with increased sales potential.

Or, let’s say you’re nearing retirement, or simply want to get out of the insurance business, and you want to sell your agency—by yourself. How will you do it? Your Mergers & Acquisitions Strategic Advisor will have experience in this sort of thing, and he or she will be able to guide you through the process and help you get the best price for your agency.

One of the most important things your Mergers & Acquisitions Strategic Advisor can do for you is to facilitate a deal allowing for the best cultural fit for your agency. You want to be sure—especially in a potential merger—that the movement of your company will be what’s best for your company. Your Mergers & Acquisitions expert will be able to identify your corporate culture and match your agency to a similar fit.

Selecting your M&A expert
Now, what should you look for when selecting the right Mergers & Acquisitions expert to join your Strategic Advisory Board? Obviously you want to select someone who has actual experience in dealing in mergers and acquisitions with an insurance agency or brokerage.

Your expert will be responsible for creating a corporate profile, including financial figures, revenues, staff biographies and resumes and even a summary of the book of business. They have to know how to value the agency and they have to know how to present it to a potential buyer. They should have a track record of firms they’ve had as clients to present to you as references.

And again, I stress the importance of recognizing corporate culture—both for your own agency and for anyone approaching you for the sale or merger of your agency. You’ve built your agencies around your values, which have been reflected on to your employees. When merging with another agency or allowing your own to be bought out, keep in mind that your employees deserve the smoothest transition possible if they are to continue working with the agency.

That’s were the corporate culture comes in, and it is the responsibility of your Mergers & Acquisitions Strategic Advisor to identify your agency’s corporate culture. If you are a “play-it-safe” type of agency who prefers slow growth vs. rapid profits, you will want to steer clear of agencies or corporations who emphasize dramatic returns as the result of risky investments.

I have one note of caution to offer you: whether or not you add a Mergers & Acquisitions Strategic Advisor to your team, when it comes to selling your agency, don’t make the mistake of giving your agency to a business broker. Business brokers know how to sell companies, sure, but do they know how to sell insurance agencies? Likely not. A business broker would have a much more difficult time identifying potential buyers for your agency than would an experienced Mergers & Acquisitions expert. A Mergers & Acquisitions expert will be able to quickly identify exactly what agencies are selling for, who’s buying who, why they are buying them, where’s the cultural fit going to be, and a lot of other issues.

Overall, I highly recommend the addition of Mergers & Acquisitions Strategic Advisor to your agency. You are an agent, producer and owner, and it is just not possible for you to be on top of everything. Let’s face it; you are an extremely busy person! A Mergers & Acquisitions Strategic Advisor will be able to guide you to the right decision when delicate situations arise. And the addition of trusted advisors to your staff will ensure that your agency will thrive in a positive and successful manner after the merger or acquisition.

Andrew J. Barile, CPCU, is the owner and founder of Rancho Santa Fe, Calif.-based Andrew Barile Consulting Corporation Inc., a strategic insurance and reinsurance consulting firm providing unique and creative insurance solutions to members of the insurance industry. Barile has over 40 years of experience in the industry, and has worked with several types of insurance firms, including wholesale insurance brokers, MGAs, reinsurance intermediaries, captive insurers, and many more. For more information, visit www.abarileconsult.com or e-mail abarile@abarileconsult.com.
If you are not capable of evaluating mergers and acquisitions activity yourself, you should make it a point to employ someone who will.