If There’s an Urge to Merge or Acquire, Look Before You Leap!

The urge to merge or acquire is often replete with the illusion that “the grass is always greener on the other side.” Yet some who have taken the step found that it’s nothing like the workable solution they envisioned. That’s usually because they didn’t do their homework beforehand.

It’s not the unknown that should be feared, but the honest buyer or seller who is unprepared. While there have been many successful acquisitions and mergers, often purchases and unifications failed due to one side or the other not preparing prior to striking a deal.

If a prospective buyer or seller is worth knowing at all, that person and organization is worth knowing well. This means requesting and receiving as much written information as possible, finely combing through it, and coming up with a list of pertinent questions to address before arriving at the negotiating table. To assure success or avoid later tribulations, consider retaining the services of an experienced third party acquisitions/mergers specialist partner with a thorough knowledge of the insurance/financial services industry.

Such intermediaries do the legwork for you, bringing sellers and buyers together on a strictly confidential basis. Backed by constantly updated system capabilities, the intermediaries not only know where prospective sellers and buyers are located but, just as important, know what they’re looking for–and what they want and what they don’t want.

Since any agency acquisition/merger represents one of the most important decisions to be made by both parties, the importance of such an intermediary can’t be over-emphasized. Many acquisitions/mergers, even when they generally run smoothly, can take a year or more to complete. These are serious undertakings involving different people from different organizations, often with different views.

Third party acquisition/merger specialists can save both sellers and buyers a considerable amount of time that can be wasted if the agency conducts the search mission independently.

There are times when opposing views can be melded together and, conversely, there are times when they can’t. If this continues to occur during negotiations, then it’s best to call the whole thing off and seek other opportunities. The lesson learned is that just because something has worked well for one party doesn’t necessarily mean it will for the other.

Further, what is often overlooked in negotiations is the absolute need for the involved organizations to form a management and marketing strategy before pen is put to paper. If these important elements aren’t addressed and agreed upon during negotiations but put on the shelf to focus upon after the deal is inked, problems are sure to follow.

It’s mandatory to ascertain during negotiations whether management and marketing strategies can be worked out in order to avoid expenditures of valuable time and effort.

It’s also important to consider beforehand such management issues as the possibility of a combined staff working in a new environment, meeting and establishing rapport with co-workers, and establishing relationships with clients and prospects.

New technology, including an updated or completely new computer system, may be needed. Jobs and restructuring may be necessary as well.

Other issues that represent challenges and demand arriving at a consensus during the negotiating process include:

These are a few of the many management and marketing issues that must be considered by an agency, brokerage, or company considering an acquisition or merger.

It especially behooves first-time buyers and sellers to understand that acquisitions and mergers are much like marriages. It is absolutely necessary to make sure the chemistry between the two parties is compatible and complimentary before heading to the altar.

Those who have entered, or are considering entering, an acquisition or merger will find themselves in a complex terrain. To go it alone without a helping hand is fraught with danger. For buyers and sellers, it’s essential they be confident that the consolidation is tailor-made to fit to what they’re each trying to accomplish, and that there are financial resources necessary to support any changes in operations.

Agencies considering acquisitions/mergers should also make sure the helping hand of a third party consultant has a good track record on providing the following services:

What sellers and buyers should demand from any outside specialized source is a clear-cut way to accomplish their acquisition or merger goals. This means the ability to provide professional guidance each step along the way. This is paramount because it helps agencies save time, avoid pitfalls, and become the recipient of opportunities they may not know exist.

The majority of industry analysts seem to agree that the continuance of acquisition/merger activity will lead to a more competitive industry. That doesn’t represent bad tidings for agents since they’ll have more leading-edge products to offer. Also, those acquiring are often able to gain the needed expertise that has been missing. This, too, proves beneficial to the agency acquired since it affords them the opportunity to operate in a more streamlined and efficient way.

What has been described here are some of the many areas that must be taken into consideration by any agency considering an acquisition or merger. By following what has been recommended, you could well find that “the grass is greener on the other side.”

Jack T. Hunn is president of Insurance Marketing Associates, a nationwide organization headquartered in Laguna Niguel, Calif. He can be reached at (949) 487-1693 or via e-mail at insmrkt@cox.net.