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Today's Viewpoint: A MarshBerry Publication

If you’re considering selling your firm, find an advisor that has your best interests.

Did you know that approximately 40% of the merger and acquisition (M&A) transactions that occur in the insurance brokerage space do not use an advisor? In other words, on average, 4 out of every 10 transactions go unadvised.

Stop and think about this. For most business owners, this is the one and only chance to capitalize on a lifetime of hard work. Doesn’t it seem logical that if you are going to do something for the first time that you would get some guidance along the way?

One reason sellers believe they don’t need an advisor is a misconception about the value and role of an advisor. A transaction advisor is not like a real estate agent (or at least they shouldn’t be). Their role isn’t just to provide you a list of who the buyers are – you can Google that. Their role is to provide you with guidance on firms that are a good fit both financially and culturally. A good advisor will help you visualize life after the deal for you and for your people. And, once you select the best option, your advisor negotiates on your behalf to drive the best value and terms for your business and your future.

The challenge the industry is facing is the market is flooded with both buyers and advisors constantly hounding you as a business owner to “take a meeting.” It is difficult to decipher who is a good partner (or advisor). MarshBerry sees it happen all too often when a buyer convinces a seller to have a meeting, build rapport, put an offer on the table, and then threaten the seller to not (1) go to market to talk to other firms or (2) hire an advisor to support them through the process. If the seller does either of those things, the buyer threatens to pull their offer and walk away. Yes, like the kid on the basketball court, they are going to take their ball and go home. Why do you think this is? The buyers know the seller will likely get a better deal if the seller has an advisor working on their behalf.

Does this make sense? These organizations want a seller to buy their stock as part of the deal and become their partner. Yet as their partner, the buyer doesn’t want the seller to put themselves in a position to get the best deal they possibly can. We believe that in most of these situations, sellers do get a fair or decent deal. There is too much information available publicly about “average value,” which protects sellers in getting at least an “average” deal. But why settle for average?

You owe it to yourself to get the best deal possible as it relates to overall purchase price and the hundreds of other terms and conditions that are typically negotiated as a part of a transaction. Given that this is the first and only time many business owners will sell, they often don’t even know which questions to ask. Without this knowledge, and no advisor on their side, a seller often leaves much on the table because their “partner” is never going to give away all their leverage.

As an advisor yourself, would you ever suggest an insured negotiate directly with a carrier for their commercial insurance or employee benefits coverages? The answer is no. You know how the underwriters think, assess risk, negotiate, etc. A good transaction advisor does the same on your behalf with a potential partner/buyer – after they have helped you assess which is the best buyer for your business.

Buyers know that if a seller goes to market with an advisor the deal is going to cost them more money and time. If you are important to them, and truly their future partner, they should want you to make informed decisions about your largest asset and the future of your colleagues….not tell you that you are not allowed to do so.

MarshBerry continues to be the #1 sell side advisor in the industry (as ranked by S&P Global). We are the best choice to help you through a very complicated process. But if you don’t hire us, hire a reputable advisor that will help you navigate one of the most important business decisions you will ever make. You will be much better off having an advisor in your corner that knows the industry than trying to do this on your own.

If you have questions about Today’s ViewPoint or would like to learn more about recent M&A activity, please email or call Phil Trem, President – Financial Advisory, at 440.392.6547.

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Investment banking services offered through MarshBerry Capital, Inc., Member FINRA Member SIPC and an affiliate of Marsh, Berry & Company, Inc. 28601 Chagrin Boulevard, Suite 400, Woodmere, Ohio 44122 (440.354.3230)

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