Author: Howard Candage
Have you ever bought or sold an agency? Did you use a consultant to structure the deal or did you do it yourself? If the latter, there's a good chance you might have left a considerable amount of money on the table and didn't even know it. Good mergers and acquisitions consultants don't come cheap but, in this article, Howard Candage explains how a consultant will usually save you money far beyond his or her consulting fee. If you're thinking about buying or selling, you MUST read this article!
This is a lengthy article since this is a complex subject. To kick it off, let's start with a true story where the names and circumstances have been changed to protect those tragically affected....
Once upon a time there was a very successful agent. His name was Silas Competent. His agency was called Ace Insurance Agency and it lived up to its name! He ran an excellent agency in a mid sized metropolitan area for many years. Silas was proud of his operation and it grew at a nice rate through the years. He had several producers and was the sole owner of his kingdom, a C Corporation. His agency grew to over $30,000,000 in premium volume. His loss ratios were excellent. His integrity was unquestioned by those in the insurance industry.
I happen to be friends with one of his former underwriters for a large insurer which you would all know. I don't mean some of you in the insurance business would know...you ALL would know the name. Lets call them Acme Insurance Company. Now my friend was an underwriter for Acme Insurance and he told me that he underwrote the Ace Insurance Agency. He was told as an underwriter, "If you get a submission from Ace Insurance, you make it work. They have made us so much money for so many years that we can afford to do most anything for them within reason and within the law." Sounds like Ace Insurance was doing the job, and Silas was living the American dream.
The family home was in the community and Silas was involved and a strong contributor to the community. This support was both financial and through community service. He was well respected and trusted through the community. The one weakness of the agency was perpetuation. Silas thought the answer was apparent as his son Joshua was nearly through college and would take the agency over. The American dream would go on.
Joshua, sure enough, came into the agency and was there for several years prior to the time his father wanted to retire. In the intervening years, the condo in Arizona became a reality for Silas as well as the ski home in the mountains. Not a lodge, a home. Life is good! Dad had his retirement in the value of the agency. Thank God he had never taken any of those offers to sell his good business. Likewise, he was glad he had not succumbed to the pressure from his good producers to "give" them a share of the agency for all their hard work. Yes, it had cost him a few good producers over the years, but it was worth it. No producer had ever left and caused him really serious damage. Besides, look what he had now!
Finally, Silas decided to retire and live the good life! He had given the transfer of ownership to his son a lot of thought and needed little professional advice to effect the transfer. After all, it WAS his son....
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Copyright 2000 by Howard Candage. Used with permission.