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Agent/Broker valuations ‘never higher,’ but recruiting deficiencies threaten perpetuation plans

Brian Anderson

ATLANTA – Values being paid for insurance agencies and brokerage firms have “never been higher,” according Bobby Reagan, CEO of Reagan Consulting.

Reagan Consulting, a management consulting firm providing strategic consulting, valuation, and merger-and-acquisition (M&A) services to the independent insurance distribution system, recently hosted more than 150 industry leaders at a three-day workshop on agent/broker mergers and acquisitions and perpetuation, co-sponsored by the Council of Insurance Agents & Brokers and the American Bankers Association.

The sentiment of the conference was upbeat, since brokers are enjoying their best combination of growth and profitability in nearly a decade. And deal activity is brisk and valuations are at record highs, according to Reagan Consulting.

But a key theme of the conference was equipping firms to build an agency perpetuation plan to remain independent, since a shortage of producer recruiting could hinder success, according to Reagan.

“When you bring together the leaders of the highest performing firms in the country and candidly discuss the issues and opportunities they are facing, you end up having an extremely valuable exchange of ideas, information and perspectives,” said Reagan.

Kevin Stipe, president of Reagan Consulting, commented on agent/broker transactions: “We have never seen valuations as strong as they are today. Already high deal multiples have jumped another 10 percent during the past 18 months. There is a lot of demand among all buyer groups, but private equity buyers are now most active – 43% of all acquisitions in 2014. These buyers are most responsible for pushing acquisition multiples to record levels. With widespread buyer demand, there is nothing today to suggest that valuations will be going down any time soon.”

A conference highlight was a panel of the CEOs of six of the most active buyers: Pat Gallagher of Arthur J. Gallagher; Jim Henderson of Assured Partners; Powell Brown of Brown & Brown; Marty Hughes of Hub International; David Eslick of Marsh & McLennan Agency; and Mike Sicard of USI. These leaders reported strong acquisition pipelines and collectively projected they hope to acquire more than $1 billion in revenue in the coming year.

Much of the conference’s focus was on challenges being faced and how leadership teams are responding to them, especially the critical issue of recruiting. Stipe noted: “A shortfall in recruiting is a long-term threat to growth, profitability and perpetuation of independent firms. Sixty percent of agencies are under-recruiting relative to their stated growth goals,” he said. “If you don’t have young, up-and-coming producers in your shop, perpetuation will become impossible.”

Internal perpetuation remains a goal for a significant number of agencies that are staunchly independent, reported Brian Dietz of Reagan Consulting. Passing on the agency to an internal buyer requires four elements: healthy operations, reasonable sellers, able buyers, and an effective transfer mechanism. Of 12 metrics within these four areas that Reagan tracks, the most-critical measures affecting valuations are: organic growth, sales velocity (percentage of business that is new business), profitability, and the “Rule of 20” balance between organic growth and profitability.

• See also: Infographic – 10 Key Facts on Producer Recruiting & Development

Speaking at the opening session was Senator Bob Corker, chairman of the Foreign Relations committee, who provided candid and insightful perspectives on external influences affecting the U.S., the business community and national security.

This conference drew industry leaders active as buyers and sellers of insurance agencies (internally or in third-party transactions), along with insurance principals seeking understanding of valuations and what drives them.

Additional topics covered in the workshop included:

  • Private equity: where it is headed and how it is affecting brokers of all sizes.
  • Bank insurance: its health and viability.
  • Alternative perpetuation strategies.
  • Transaction financing.
  • Producer recruiting and development: impact on agency value, marketability and perpetuation.
  • Trends in employee benefits and the buying and selling of benefits agencies and books of business.
  • Valuations: how to determine, manage, and maximize agency value.
  • Acquisition searches: how to source good prospects.
  • Mergers of insurance agencies: how to make them work.
  • Effective integration: capturing the value once an acquisition has been done.
  • Negotiating a purchase agreement.


About Reagan Consulting: Reagan Consulting is a management consulting firm providing strategic consulting, valuation, and merger-and-acquisition (M&A) services to the independent insurance distribution system. The firm’s services include appraisals of fair market value, strategic planning, M&A advisory, ownership perpetuation planning, key employee compensation and equity plans, and agency performance benchmarking. Reagan Consulting co-developed the well-known Best Practices study and produces the quarterly Organic Growth & Profitability benchmark survey.



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