Selling to and Partnering with a Private Equity National Brokerage

Over the past five years, there have been more than 4,000 publicly announced independent insurance agency merger and acquisition (M&A) transactions throughout the United States and Canada. Private equity (PE)-backed insurance brokerages accounted for over 70% of those transactions, continuing an impressive trend that began over a decade ago. In addition, agency valuation multiples, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), have also skyrocketed over the last ten years, roughly doubling for almost all revenue-size agencies. In large part, this significant increase was due to tremendous investment and competition from an increasing number of PE-backed insurance brokerages competing for acquisitions. Currently, buyer demand from PE-backed insurance brokerages remains strong and active. EBITDA multiples continue to remain at record levels.

Strategic Partnership: General Overview

Private Equity (PE) -backed national insurance brokerages strategically acquire and partner with various types of carefully selected independent insurance agencies and brokerage firms to accelerate growth, diversify and strengthen their offerings, enhance expertise, and create additional value. Acquired insurance agencies and brokerage firms, “partner firms”, gain access to robust resources, technology, operational support services and the financial backing of a well capitalized national insurance brokerage. Partner firms have the ability to accelerate and successfully scale growth, deliver the highest level of service and value to clients, while continuing to maintain their autonomy and local brand.

EBITDA valuation multiples are used to measure the value of all insurance firms. In general, partner firms receive 80% or more in guaranteed cash at closing and 10% to 20% in stock ownership in the company. Partners will have the ability to cash out or retain their stock when the company recapitalizes, typically every four to five years. All Private Equity-backed brokerages are unique, however, past stock returns have been exceptional and more lucrative than a good stock market investment, minus the risk. In addition, partner firms are provided with three years of earnout opportunities, growth bonus incentives. These additional bonuses are realistic and attainable, paid out in cash or equity, contingent on growing one’s own agency by a defined annual percentage of EBITDA or revenues. Your entire team of associates would benefit, as well, with greater career opportunities, increased compensation and attractive incentives.

Over the last several years, PE-backed firms have attained strong annual double digit organic growth and continue to increase in value at a remarkable pace through both acquisition and organically. If you’re nearing the end of your career and you are planning to retire in the near future and/ or you are interested in fueling growth, taking your insurance firm to the next level, then now is the perfect time to explore your options. Strategically selling to and partnering with a Private Equity-backed national insurance brokerage positions your agency or brokerage for many years of substantial growth to ensure long-term success, financial security and generational wealth. Now is the perfect time to explore your options.