It has finally happened.
The interest rates have caused a slowdown for many buyers in the insurance agency market. Most of the buyers are using leverage to purchase these agencies. I am sure most buyers saw this coming and secured their borrowing for future transactions. The problem is that it costs them more to use it. I am sure this is also affecting other industries, but it has caused many of the insurance space buyers to decide which transactions they want to pursue and what they are willing to pay. Many of the active buyers are being selective, and some buyers are just not even in the market at this point and are sitting it out.
If you are a seller, what does this all mean for you?
- Now more than ever, you need to have an advisor you can trust. That advisor should be talking to you about timing and value and the effect of the interest rates on that timing and value.
- You need to understand your value and how it might have changed. This includes the larger, more profitable agencies. While we believe they will still be getting a higher multiple than the smaller, less profitable agencies, the multiple they could have received even three months ago has probably decreased, or the buyers are not paying 100% of the proceeds upfront.
Buyers have many tools in their toolbox to work around the issue of higher interest rates that will enable them to continue to purchase insurance agencies.
One of the tactics is that they will try to use this environment to reduce what they are paying for your agency. That is why you need to know the true value. If you don’t, you are likely to fall prey to this tactic, and other tactics that buyers use that are not-so-obvious ways of reducing the value of your agency.
Contact Sukay & Associates to schedule a discovery call today to learn what your agency is worth.