1. Mergers & Acquisitions Best Practices
Sponsored by IIAT Insurance Agency
Tom Braniff, JD, CPCU| Texas Insurance Consulting

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3. Mergers & Acquisitions Best Practices
Thomas M. Braniff, JD, CPCU
January, 2019

4. Seller’s Market Prices at record levels. Much activity.
Down payments up.
Payment terms shorter.
Buyers 5 to 1 over Sellers.

5. Middle Market Agency Transactions By Year
Source : The Hales Report

6. Valuations at Record Highs

7. Who is Buying?

8. Most Active Acquiring Brokers
National Brokers
2018
2017
2015
2013
Acriscure, LLC
100 92 56 5
Hub 50 42 30 32
Broadstreet Partners 17
A J Gallagher & Co. 26 39 18
AssuredPartners, Inc. 33 15 29 19
Hub International 28 25
Alera Group 16
Brown & Brown 22 11 12
Seeman Holtz
NFP Corp 20 6
Marsh & McLennan 7 4
Sub Total
335
306
243
114
Other
262
285
196
122
Total
597
591
439
236
Source : The Hales Report

9. Considering Selling? Know your agency.
Clean-up your financial statements.
Clean-up your agency database.
Written employment/producer agreements.
Trim unnecessary expenses.
Know your agency.
Commercial / Personal.
Revenue / compensation per employee.
Major markets.
Strengths / weaknesses.
Specialties / concentrations
Know the type of buyer you are seeking.
Liquidity / capabilities.
Commonality of culture / chemistry
Future plans

10. Considering Buying? Know what you want to acquire.
Get to know your competitors (i.e. potential sellers).
Arrange prior approval of financing needed.
Be ready to move quickly.
Due diligence plan.
Relationships with carriers and customers.
Commonality of culture / chemistry.

11. Information Needed Commission statements.
Financial statements (tax returns / audit reports).
Information about customers
Operational handbooks.
Existing contracts with insurers.
Litigation / regulatory information.
Employment, non-disclosure and non-compete agreements.
Miscellaneous.

12. Deal Process

13. Offer and Negotiations
Form of purchase – assets v. stock
Price and terms of payment.
Upfront money.
Earn-out.
Stock in acquirer.
Representations and warranties.
Qualifications.
Survival.
Contingencies and restrictive covenants.
Non-compete v. Non-solicit.
Indemnifications.
Cap / Deductible.
Employment matters.

14. Deal Structure Few true mergers Large transactions
Publically traded stock deals
Few stock purchases
Liabilities
No amortization of consideration paid
Mostly asset purchases
Limited liabilities
Amortization of consideration paid

15. Valuation of Agencies Street Talk = Multiple of gross revenues.
Smart Buyers = Multiple of projected future profits.

16. Proforma Profit / Loss Statement

17. Parting Advice
An individual that attempts to represent himself has a fool for a client.
- Abraham Lincoln (paraphrased)
Get advice and assistance from experienced professionals
Insurance Consultant
CPA
Attorney
What you do once in your life, experienced professionals do many times.
Move deliberately / cautiously
Sometimes the best deal is no deal
Be willing to walk away