Sukay & Associates is asked frequently to provide valuations for current and perspective clients. To the best of my knowledge, we are the only advisory firm that provides free insurance agency valuations to qualifying agencies. We also provide this service to clients who have been formally engaged to begin the sales process. Before we begin the formal process, we give the client some guidance on what to expect when we receive proposals.
The Market is Changing
Unfortunately, this has become less of an exact science. The number of buyers used to be limited to a few, well respected and disciplined parties. Those buyers still exist but they seem to be responsible for a dwindling number of the deals. We have enjoyed working with some of the newer buyers. A few of them have built impressive agencies in a brief period of time. We have encountered a problem recently trying to decide which buyers we will contact on behalf of our clients. The reality is that Sellers have more choices than ever. The best part is that while the number of agencies looking to sell has been reduced, the number of qualified buyers has increased. We are encouraged by the quality of the management of these Buyers and see them having a bright and successful future.
Although I would have difficulty in picking a favorite, it appears that decision is not as difficult for our clients. Often, a difficult decision is made easier when one party’s proposal is clearly higher than other potential Buyers. There is nothing more exciting when one party structures the deal with the intent of being successful. This feeling is only present when you have done a thorough job of identifying potential buyers. We used to see valuations fall within a very well-defined range. This is just not the case in today’s market. There are buyers that still want to pay the same multiples that they paid several years ago. I wonder how they are ever able to close a transaction.
Most Buyers recognize that the market has become more competitive and have adjusted their multiples upwards. The larger the agency, the higher the multiple because a potential Buyer will understand that the competition for the agency will be much greater because of the size of the agency. Buyers are also interested in specialization. We recently spoke with an agency that had a strong national reputation and a specialty that seemed to be less risky than most specialties. We were disappointed that they chose not to pursue a sale because I believe it would have shown us how high the ceiling is for insurance agency sale multiples.
More likely, agencies will have some issue that will cause some concern for a Buyer. We love to work with this type of agency. We solve problems. My partner and I have seen just about everything and realize that no problem is unsolvable. Whether you are a large agency, one with a specialty or one that has a few issues, we can help you determine the value of your agency. In the end, many agencies will need to take the big step of discussing a sale. This is really the only way to determine the value of your agency.
The Value of Your Agency
As a firm, we believe an accurate valuation 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!
