Today's Viewpoint: A MarshBerry Publication

IMPORTANT CONSIDERATIONS WHEN ASSESSING POTENTIAL PARTNERS

If you’re considering a sale of your insurance agency or brokerage, do you have a process that allows you to meet the right prospective buyers who are a fit for your goals and priorities?

If you are a business owner looking to sell your firm to a third party, determining who to partner with is critical. Instead of selling to the first prospective buyer who reaches out, consider engaging a financial advisor to organize a structured and competitive process that allows you to meet a variety of firms. At the onset of a process, it is important to understand your goals and priorities, so you can find the partner who is the best fit for you and your organization.

While purchase price and value maximization are important, other factors are also worth considering when selecting a suitor. Some of the notable ones are outlined below:

  • Team – Who would you enjoy working with? Your relationship with a buyer likely will not end at the close of a transaction. Many buyers expect selling owner-operators to stay on board for a minimum of one to three years post-close to allow for a smooth transition. In addition, most buyers include earnouts in their transaction structures. An earnout is financial consideration that you as the seller can earn after your deal closes if your business hits certain predetermined financial targets, which are often related to revenue or EBITDA (earnings before interest, taxes, depreciation and amortization) growth. Earnouts give you a financial incentive to stick around.
  • Cultural Fit – Which buyer has a culture that is most compatible with yours? Do you have similar values, beliefs, and leadership styles?  
  • Business Understanding and Vision – Which buyer best understands your business? Who shares your vision and is willing to invest to achieve it?
  • Ability to Help Drive Growth – Which buyer would best position your company for growth? Who has the resources (such as sales tools, technology, marketing strategies, carrier relationships, distribution channels, complementary product offerings that can be cross-sold, etc.) to take your firm to the next level? This is especially important if you have a growth-based earnout.
  • Employees – You want to leave your employees in good hands. Which buyer would offer them the best workplace environment and career opportunities?
  • Integration Strategy – What level of integration would you be comfortable with?  Some buyers allow acquired businesses to operate pretty autonomously, even permitting firms to retain their names. Other buyers prefer to fully integrate a target into their organization.
  • Financial Strength – Do all the buyers that you are considering have the financial capacity to make a competitive offer? And do they have access to sufficient financial resources to fund your transaction in the event you move down the path with them? A sale process is resource-intensive, so it can be costly if a deal falls through.  

As a business owner, you have undoubtedly invested years of time, energy, and resources into building your firm. The decision to sell, and who to sell to, are ones you must get right.

If you have questions about Today’s ViewPoint or are thinking about exploring a potential sale of your firm, feel free to email or call Kristen San Marco, Vice President, at (440) 392-6707.

Investment banking services offered through MarshBerry Capital, LLC, Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, LLC, 28601 Chagrin Blvd, Suite 400, Woodmere, OH 44122 (440) 354-3230

MarshBerry continues to be the #1 sell side advisor in the industry (as ranked by S&P Global). If you're considering selling your firm, we are the best choice to help you through the complicated process. If you don't hire MarshBerry, hire a reputable advisor that can 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.