Top tips for how to sell your insurance brokerage

Top tips for how to sell your insurance brokerage | Insurance Business

Top tips for how to sell your insurance brokerage

As the insurance workforce ages, more and more brokers are starting to think about transitioning their businesses for the future. Family-owned brokerages are being handed over to children and many independent firms are looking at the mergers and acquisitions (M&A) market with a keen eye for third-party buyers.

While every insurance M&A transaction is different, there’s one common issue that keeps arising, according to Michelle Mondorf, senior associate at Loopstra Nixon LLP, and speaker at Insurance Business Canada’s upcoming ‘How to sell your insurance brokerage’ webinar.

The issue - a desire for speed.

“What’s surprising is how some people want these transactions completed as quickly as possible. They want the deal done tomorrow and they don’t want it hanging over them,” Mondorf told Insurance Business. “For M&A transactions, it’s important to make sure everything is done properly and to take some time doing the due diligence to ensure the transaction is a good fit that works for both parties.”

Mondorf is an associate of the corporate and commercial practice group with Loopstra Nixon LLP. Her practice focuses on mergers and acquisitions, financings, corporate structuring and reorganizations among other things. She spends a lot of time “stressing the importance of due diligence” with her M&A clients.

“The faster you rush into and complete an M&A deal, the more likely you will run into some legal hurdles shortly after the transaction closes,” Mondorf said. “It’s not always legal issues that come up during the process that are the most problematic – it’s often the ones that come up after the deal is done because the transaction was rushed.”

Oftentimes, one party just wants to get on with their retirement and the other wants to get on with business – but that’s not the best dynamic for a successful M&A transaction, according to Mondorf. It takes time to “truly get to know your brokerage” and get it into top shape, but it will be time well spent at the time of sale, she added.   

“There are lots of basic things brokers can do to prepare their business for transition. They can make sure their books and records are up to date and that they have all their important documents and paperwork in place,” Mondorf added. “It’s also a time to make sure all their relationships are as strong as they can be, including those with their employees.

“Taking the time to properly prepare your brokerage for sale is going to have more value to a potential purchaser versus them having to play a guessing game about what state the business is in and what surprises may lie for them around the corner. It’s a time-consuming process, so it’s definitely something a potential vendor is going to want to consider doing well in advance of their anticipated sale process.”

Getting your brokerage business in good shape, having a clean bottom line and minimal loose ends is also likely to “get you a higher, cleaner purchase price,” Mondorf added.

For more information on how to get the best value out of an M&A transaction, sign up for the exclusive ‘How to sell your insurance brokerage’ webinar, taking place on September 19.