As documented in the well-renowned Future One Agency Universe Study, nearly one tenth of all agencies in the insurance business has been involved in a merger or acquisition within the last two years. If this rate of merger and acquisition continues on at its current rate of acceleration, this number is likely to increase, and your agency may even be included within those statistics.

Insurance agency mergers and acquisitions remained strong through the second quarter of 2017 with a total of 135 reported transactions, according to OPTIS Partners. In the first quarter of 2017, there was a whopping 185 deals and transactions, bringing the six-month total to a record-breaking 320 total transactions.

Acquiring another insurance agency can be a major operational and financial step to growth and further success. Here are six things you can do to as you begin the acquisition process:

  1. Define Your Parameters

In order to successfully acquire an insurance agency, you must make sure to ask yourself important questions about your goals. Do not pursue acquisition for its own sake; in fact, that action could potentially have negative consequences for you and your business. Ask yourself why you want to buy, who your clients are, and what their needs are. Who will benefit from this acquisition? Most importantly, how much risk and debt are you willing and able to take on?

  1. Have a Plan

The process of meeting and identifying various agencies to potentially acquire is a long and arduous process. Create a comprehensive plan for yourself and your company to ensure that this initial step is as easy as possible. Draw up a list of your agency’s strengths and why joining you is beneficial for all parties involved.

  1. Assess the Risk and Value of Every Candidate

Once you have done your research and identified a potential acquisition candidate, it is crucial to evaluate what their agency is worth and how you are going to pay for it. You want to make sure you have a clear grasp on the potential risk factors of acquiring this particular agency, and you want to think through all potential financial and contractual scenarios. It is essential to determine how you plan to pay for this acquisition before moving forward.

  1. Create the Structure of the Acquisition Transaction

Because no two transactions are alike, it is important to carefully establish the structure of your particular acquisition. This is your transaction; it’s personal. Make sure the structure you create reflects that.

  1. Due Diligence, Documentation, and Closing

As you and your seller finalize the terms of your acquisition, make sure you run through the financial due diligence. Consider hiring a third-party expert to help with the closing and to ensure that all necessary and essential financial information has been properly shared.

  1. Integration

Once the sale is complete, both parties must begin the challenging work of combining or integrating the two companies. There are a number of choices that people make during the integration process. Some people prefer a hands-off approach, letting the combining process work itself out naturally, while others like to play an active and involved role in the integration process. Know which style you prefer in advance and be sure to communicate that choice with your partners.

Acquiring an insurance agency is serious business and requires a lot of careful planning and thought. Use these helpful tips to stay on top of your progress and future. Read more here on Succession Link.

Did this answer your question?