As a buyer, we don’t enter into deals unless we believe that the deal will be a success for both parties. We put a lot of work into identifying the right agencies and only engaging in deals that we expect to complete. We network, talk to brokers and monitor the market to ensure that we identify the right agencies and the right opportunities.
Thankfully, that work means we get involved in deals that are destined to succeed 99.9% of the time. However, no system is perfect and we have encountered deals that were more difficult than we expected and required a lot of work or an adapted approach to complete.
Keeping Secrets
One issue that has caused problems in the past is the when the selling owner has not shared information with their key employees. Many owners prefer to deal in secret rather than make it known that the business is up for sale.
The fact that your agency is for sale could impact morale, it could affect your relationship with clients and it might weaken your bargaining position. We would never encourage owners to conduct deals out in the open.
However, that doesn’t mean you should keep all of the details to yourself until the deal is signed. Aside from actual shareholders, who have to be informed in order to discuss their interest, your agency will have key stakeholders. You will have employees who are vital to the success of the business and represent a large proportion of the value the agency. Holding information back from these key employees will do nothing to enhance the deal.
If you have a particularly effective producer or senior executive who only finds out that they have a new employer when it’s already happened, without any opportunity to provide input, they are likely to be unhappy. In a worst case scenario, they may reconsider their position at the company. If that employee is responsible for a large proportion of your revenue, it could mean the loss of clients and force a renegotiation of the sale.
Rumors Can Be More Damaging Than The Truth
There is also the possibility that the information gets out before you are ready to discuss it with key employees. Rumors about a potential sale are likely to cause more damage to morale than the truth ever could. The fact that you are planning to sell combined with the knowledge that you are keeping it a secret could cause key employees to react irrationally.
The simple fact is, whether it is written into their contracts or not, these employees are responsible for the success of the business. They will feel entitled to a say in its sale. In our experience, it is best to keep the key stakholders apprised of the situation and include them in discussions that affect them directly. This offers them an opportunity to engage directly with the buyer and makes them feel valued by both parties. They become valuable supporters of the deal rather than potentially damaging opponents. That support may be crucial, not only completing the deal, but ensuring you make the best deal for everyone involved.
What is the Value of Your Insurance Agency?
As financial advisors who represent insurance brokers in business transactions, we are commonly asked one question “How much is my agency worth?” It is the one topic that each and every agency owner wants to discuss. It would be nice if we had one simple answer; unfortunately, there is no simple answer. Click below to download our comprehensive whitepaper which details “The 9 Factors That Indicate Value”.
