5 Things to Know When Buying or Selling an Agency in 2025

With rapid changes occurring in Washington, it can be challenging to know how they will affect one’s business. Owners of insurance agencies and other businesses may be especially focused on how changes will affect growth opportunities, particularly for mergers and acquisitions.

Here are five ways recent events may influence decisions to buy or sell this year.

Interest rates are declining, but not at the rate that was expected several months ago. In December, members of the Federal Reserve Board (the Fed) predicted overall cuts of 50 basis points. Persistently high inflation, however, makes it less likely that the Fed will drop rates anytime soon.

Cuts in the Federal Funds Rate by the Fed impact the prime rate (which runs about 3% higher than the FFR). When the next cuts come, they won’t hit ordinary retail borrowers right away. Many business lenders use Treasury bond yields as their benchmark for setting interest rates for their loans. The T-bond yield generally moves along with the prime rate, but it is affected by a wide range of economic factors.

Still, current interest rates are lower than they were through much of 2024. Lower interest rates make deals more attractive and likely will prompt more M&A activity across all sectors.

President Donald Trump promised to cut regulations to spur innovation. In the insurance industry, reduced regulation could make operations easier and potentially simplify consolidation of books of businesses post-sale.

Trump also has signaled more lenient antitrust policies, which could promote M&A activity. As the Republican base has become more populist, however, Republican lawmakers may provide pushback against large mergers, especially in the tech industry.

The Tax Cut and Jobs Act (TCJA), enacted during Trump’s first term, is likely to come back in some form during his second. Most of its provisions either have expired or will sunset by the end of 2026; now it looks as though many will be reinstated or made permanent. Notable provisions likely to be enacted include 100% bonus depreciation for big-ticket purchases by businesses, lower individual tax rates, and reduced corporate tax rates (possibly as low as 15% for some businesses manufacturing within the United States). Continuing the 20% pass-through deduction for small business owners would benefit many independent agency owners.

Lower taxes for individuals may free up dollars for additional insurance spending, and reduced corporate taxes may fuel business expansions, leading to an uptick in business insurance purchases. These trends may help build organic growth, which is an important factor in making an agency attractive to buyers.

Trump also has indicated a willingness to reduce the capital gains tax rate. Such a move could prompt some tentative sellers to put their agencies on the market, as they anticipate that the tax implications of the sale could be mitigated.

Trump has announced tariffs on goods from China, Canada, and Mexico, and reciprocal tariffs against countries charging fees (such as value-added tax or VAT) for imported U.S. goods. Tariffs could have a negative effect on insurance agency profitability by disrupting supply chains and raising the cost of materials needed for claims responses. Lowered profitability could put downward pressure on agency valuations, which would affect sale prices.

On the other hand, tariffs may bring an upswing in business insurance, as more companies onshore their manufacturing to avoid tariffs. Expansion of domestic businesses could mean more demand for insurance, pushing agency profits higher.

The four major hurricanes of 2024, the Los Angeles wildfires, and a multitude of other climate-related events struck the insurance industry hard. As companies regroup and recover, the costs of these weather phenomena will have to be managed. The effects of the losses of 2024 and early 2025 may affect agency profitability and valuation in the years ahead.

Is 2025 a good time for M&A?

Some experts are predicting 2025 will be a strong year for M&A activity. Agency owners thinking about a sale or purchase should weigh the strengths and challenges of any potential deal with a team of experts, including a trusted lender who understands the insurance industry. If the fundamentals of the deal work for all involved, 2025 may be a great time to buy or sell.