I'm looking for some feedback on a situation that has been presented to me. I was approached by a producer who has 25% stake in an independent P&C agency and is looking to get out. This seems like a potentially good way for me to enter the market... but with some equity and income. My goal really is to focus on a very niche line of business. Based on what I've read... a good rule of thumb is that I could pay 1.5 to 2 times the annual commission rate to acquire an agency (So in this case between 35% and 50%). I'd also guess the rate should be on the low side considering that I would have a minority stake.
What questions should I be asking ?
What are the pitfalls here (political is very high on my mind) ?
I would think I should get either 25% of the current books commission or the commission on the book sold by the agent selling his equity. IS that reasonable ?
What are some reasonable records to request ? I would think the count of policies in force and total commission for the last 3 years as well as tax returns for the last 5 years is reasonable.
Would you consider this if it was a good situation (how do you define that) or would you run from this ?
Thanks!
What questions should I be asking ?
What are the pitfalls here (political is very high on my mind) ?
I would think I should get either 25% of the current books commission or the commission on the book sold by the agent selling his equity. IS that reasonable ?
What are some reasonable records to request ? I would think the count of policies in force and total commission for the last 3 years as well as tax returns for the last 5 years is reasonable.
Would you consider this if it was a good situation (how do you define that) or would you run from this ?
Thanks!
Last edited: