3 Key Elements for a Successful Middle Market Insurance Transaction

In the insurance space, larger firms and conglomerates almost invariably hire M&A experts as part of the team overseeing such transactions. Conversely, small and some middle-market businesses are less likely to do so, and as a result, they lose out on hundreds of thousands of dollars of potential profit. It may surprise you to learn that middle-market insurance firms stand to lose comparatively more than their larger counterparts, which is why we recommend that every smaller and middle-market insurance agency take the time to work with M&A experts before and during each stage when they are ready to sell.

At Springtree Group, our experts recommend that middle-market firms keep their focus on three central components: a clear objective for the outcome of the sale, communication with an experienced M&A team, and scrupulous due diligence.

Setting a Clear Objective 

When it’s time to sell your business, you must first form a clear objective for the outcome of the transaction. If you share ownership with partners or report to significant stakeholders, you must all work together to determine what a successful sale looks like for all. Failing to do so will certainly create major obstacles that will hinder your ability to close on an appealing offer.

You may decide that a complete exit with cash in hand is ideal, but you might also decide that you wish to retain a percentage of the company. Your partners may want to stay on, but you may still decide to sell your stake.

It’s also imperative to determine if your terms of sale will include clauses regarding the future of your existing employees, especially those who form the core of your team. Details like these will have to be clear from the outset, or they may break an otherwise mutually beneficial deal.

An Experienced M&A Team

Once you have communicated with all applicable parties and are clear on the details of your objective, it is time to bring our experienced M&A team on board. The deal you will be making is complicated and intricate. Our experienced professionals will guarantee that you do not have to accept a sub-par deal; rather, our knowledge, extensive network of qualified buyers, and our status as a niche M&A firm that works exclusively with small and mid-size insurance agencies means our skills are unparalleled.

When we are on your team, you will be able to relax and trust that your business is in good hands. We will secure the best offer possible as quickly as possible, and our vetting of potential buyers means your deal will not fail due to inadequate financing.

Scrupulous Due Diligence

In the same way that we vet potential buyers, all savvy buyers will require proof of your business’s health and value. While the first analysis will be merely a high-level overview, a successful outcome will result in detailed inspections of your firm.

Your assets, liabilities, tax information, real estate holdings, security structures, corporate organization, employee benefits, and more will all be laid open for the buyer. Consequently, we want each of our clients to organize their finances and identify high confidence in those numbers.

Additionally, we recommend fully disclosing areas of the business that need work. Otherwise, when any weaknesses are uncovered later, a buyer may pull back, suspecting that other unfavorable details are being similarly obscured. This loss of trust could be enough to tank a deal, so it is never worth the risk.

Let’s Get Started 

While a merger or acquisition is always complicated, Springtree Group will make your part as stress-free as possible. When you’re preparing for sale, contact us to initiate confidential conversations regarding the specifics of your insurance agency. We’re eager to secure you a better deal than you may have thought possible.