The M&A tipping point: When to hire an outside advisor

Responding to our Comment of the Week, IBA found the answer to an important reader question on selling a brokerage.

Insurance News


This month, Insurance Business ran a three-part series on successful succession planning for independent agencies. We highlighted the importance of attracting young talent to your office, common valuation mistakes made by those looking to sell their agency and an ESOP approach that precludes both an inside and outside sale.

In our piece on the valuation process, Kevin Stipe discussed the value an outside advisor can bring to the outside sale process. Our reader Lowell had one further question, however.

In this week’s Comment of the Week, Lowell asked:
At what size of written premium is this more so needed verus a small Book of business?

A good question deserves a good answer, so we caught up with Stipe who said that advisors are helpful to agencies both large and small. However, different advisors deal with different agency sizes.

“I would say that if you’re bringing in under $2mn in commissions—that’s about $20mn in written premiums—then you probably want to find an advisor locally,” Stipe suggested. “If you’re over that, then you can potentially work with somebody outside of the area who’s an industry specialist?”

The reason? Smaller agencies have less to spend on the expenses attendant with hiring an advisor outside of their own backyard, include air fare.

Thank to you Lowell and to all our readers who commented this week!

You may also enjoy: "Looking to sell? Get the valuation process right"
"The one thing you need for successful succession planning"
"Case Study: A unique approach to perpetuation planning"

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