Earlier this year, we discussed the increase in mergers and acquisitions over the past several years. In September, Insurance Journal reported transactions were down from 2015, but activity remained robust. This evaluation has recently changed, according to OPTIS Partners’ Q3 2016 Agent/Broker Merger & Acquisition Update, which reveals an increase in activity compared to 2015.
“The number of insurance agency mergers and acquisitions over the first nine months of the year rose from 338 in 2015 to 344 this year…,” stated Market Wired in its coverage of the report. “There were 108 deals announced for the quarter, up from 104 in 2015.”
The report noted that the role of private equity firms continues to be significant in M&A activity, accounting for over 50 percent of the transactions in the first three quarters of 2016. The dominant focus remains on property-casualty agencies, accounting for 53 percent of deals made so far this year, and sales of employee benefits firms have increased over each quarter compared to last year as well.
M&A’s Impact on the Producer
One of the most challenging aspects of the increased M&A activity is new management, which often comes with a shift in corporate culture. Determining whether you want to remain at your agency after it has been purchased can be a tumultuous decision because the new ownership likely will bring added pressure to increase revenue levels and returns, which often also brings a decreasing attention to client relationships.
In the sea of M&A activity, insurance producers may be highly compensated component of a business, but they have no say, no equity interest, no ownership and few options where a noncompete is in the picture as well. Depending on the makeup of the sale, the pressure may be on for the producer. If the changes made by new owners are unfavorable or it’s just plain unsettling and disruptive to how they manage their clients, there is not much they can do without equity interest in their book of business or ownership in the company.
Whether your agency is gearing up for a merger or acquisition or you are struggling to identify with the structure of the traditional corporate agency model, there is another option. The entrepreneurial agency model offers higher commissions, equity interest opportunities, stock options, and increased decision-making power. Additionally, the entrepreneurial agency model offers producers more flexibility in their schedules and improved work-life balance.
Download the “6 Questions Producers Should Ask to Ensure Their Company Fits Their Goals” ebook and evaluate whether your agency, or the impending purchasing agency, is the right fit for you and your future.
If you find you’d like to request a confidential consultation to discuss the options available to you in an entrepreneurial agency, click here: