Traits of a Professional Buyer

By: John Biasiello

There has been an aggressive attempt within the private equity market to enter the insurance brokerage business in recent years.  Many of these private equity funded agencies have been started by insurance professionals from well-known and respected established agencies.  However, we have also seen the entry of others who see the insurance industry as a means to a financial gain. We receive calls from these potential buyers asking us how can they best enter the marketplace.  

Buyer Strategy

The first thing we always look for is whether the leadership of the agency has had a history of building an agency and creating value for its shareholders, employees and customers.  In order to create value for these stakeholders, it is important that you enter the market with a strong strategy, communicate it clearly and stick to that strategy. The strategy can’t be to buy a bunch of agencies at six times EBITDA and create an agency that is large enough that another private equity will buy the agency for 13 times EBITDA.  If you are interested in joining this type of firm, make sure that you talk to every possible buyer and accept the highest offer.

Once the agency is created, don’t expect that agency owners or advisors will provide you with many opportunities!  There are simply too many potential buyers in the market. The most successful buyers will actively identify and pursue potential agencies.  They will aggressively contact multiple agencies that meet certain profiles such as size, geographic market or types of books of business. It is important to use social media but there is no substitute for getting out there and meeting with agency owners in person.  People like to do business with people they know.

Seller Meetings

Once a buyer arranges a meeting they must make an impression.  Agency owners are interested in the strategic fit and why you are interested in them.  They want to know what you have to offer. It is very important that buyers do their homework prior to the meeting.  We had a buyer who was confused and wasn’t sure who they were meeting with. Do your best to spend time learning about them as individuals and understand the makeup of their business.  If you understand their business, the meeting will go much smoother. It also helps with the next part of the process. During the meeting, set the right expectations up front and don’t avoid the difficult issues.   If your plan is to combine them with another agency or you expect to eliminate positions or services, it should be discussed before the proposal is submitted.

As soon as possible, make a decision to either move forward or move out of the way.  Don’t waste your time or that of others in the process if you aren’t seriously interested in moving forward.  Agency owners want to know that they will be an important part of the buyer’s strategy. We have never completed a sale when the buyer was only moderately interested in the seller.


If you are truly interested in the agency, don’t be afraid to compete by submitting an aggressive financial offer.  Does anyone really believe that the long-term success of a buyer will depend on buying agencies at a very low multiple?  Success will be determined by the quality of the agencies that are acquired and how those agencies performed after the deal has closed.  Price is an extremely important part of the decision-making process. However, it is not the only part of the decision-making process. Agency owners want to be part of a successful agency.  They are proud of the agency that they created and want to be part of something successful after the sale. It is very common for agency owners to develop a “favorite” potential buyer during the sales process.  This usually happens prior to a submission of a proposal. If you follow up with a proposal that is not at least what the current market is offering then the seller will feel that you are not serious.

Due Diligence

Due diligence is a very important part of the process, but it is often delegated to financial people with little business experience and no decision-making ability. Don’t leave the important part of the process to others.  Smaller buyers often hire outside accounting firms to perform the due diligence. While I have respect for the accounting firms, they often rely on a process or a template of tasks rather than an understanding of the business.  

The best due diligence teams seem to be under the leadership of an individual who was involved in the transaction and then relies on an experienced team of financial, operational and human resource professionals who gain an understanding of the material aspects of the seller.  As noted, the individual that is responsible for the due diligence should have the full support of the Buyer and authority to make decisions to resolve the inevitable issues that arise during due diligence.

During the sales process, the seller makes representations regarding the financial prospects of the agency.  They also represent many other contractual matters. The purpose of the due diligence is to validate those representations.  If the buyer undertakes the due diligence with the idea of finding or creating issues with the sole purpose of reducing the price, the buyer risks losing the deal.  They certainly create a situation where advisors like us will be extremely hesitant to bring them future deals.

In summary, we feel that the best traits of a buyer are the communication of a sound strategy, preparation and communication at the initial meeting, fairness of the financial proposal and the ability to close the deal in an efficient, professional manner.

Agency Valuations

As a firm, we believe answering the question “How much is my agency worth?” is part of our responsibility and the foundation of a great working relationship – even if that is further in the future. Because of this we, unlike most firms, offer free insurance agency valuations for those who qualify. Click below to apply.


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