There are many benefits to be gained by merging your insurance company with another business. In some cases, similar insurance firms merge together to create a ‘single’ provider and to avoid duplication. This eliminates competition between the two firms while also significantly reducing costs by merging their resources and sites together for more efficient practises.
There are other economies of scale that can be achieved via mergers, and research and development is another area that can benefit from a merger. More funds become available so that insurance firms can conduct research regarding new insurance products and consumer demand. A merger can also regulate a monopoly, or insurance firms can merge with similar businesses in order to expand their offering. The possibilities are endless. But, if you are to take advantage of them, you need to avoid the common pitfalls mentioned below.
Integration errors are common and very costly. There are many different mistakes that can occur during this phase. This includes taking customers for granted because you are too busy putting an integration plan in place, taking too long to assign roles, missing the first payroll, and sweating the details once the deal is complete. You should always devise a detailed plan before merging your insurance firm, not after.
Not Being Prepared for the Time and Effort Involved
A merger can take a huge amount of time and effort. It is not uncommon for such deals to take between six months and a year to be finalised. Some mergers have taken even longer. Substantial resource commitment is required by the seller while the buyer needs to carry out significant due diligence. Both parties must carry out a lot of preparation in advanced.
Overlooking Process and People Changes
Your company can end up in a state of turmoil if you do not consider changes to personnel and processes before the merger. This can lead to losing the talent you need and you can end up with an unhappy and undedicated workforce on your hands. Therefore, it’s essential to make sure you consider what roles will end up duplicated, what will happen to the individuals in the duplicated positions, and what processes are going to be used for what tasks. Communicate plans so that tension is reduced, be transparent with everyone impacted, and ensure there is internal support available.
Failing to Consider the Why
It may sound ridiculous, but a lot of business owners fail to stop and think why they are merging with the firm in question. You need to establish clear goals from the offset so that you can determine whether the merger is going to help you achieve your targets.
Not Hiring a Top Quality Financial Advisor
Last but not least, hiring a financial advisor is imperative, as they will be able to advise on market comparable valuations, assist with negotiations regarding price and deal terms, coordinate meetings, prepare necessary documents, and much, much more. It is far too risky to conduct a merger deal without expert financial assistance.