How is Covid19 affecting activity for agency mergers & acquisitions (M&A)? To get perspective on that question, we turned to principals of B. H. Burke & Co., Inc. (BHBCo), a respected firm that specializes in agency valuations and assessments and consults with buyers and sellers in the purchase, sale, and management of independent property-casualty insurance agencies. Everett W. Shaw, ASA, President and owner and president of BHBCo and Thomas D. McGraw, CPCU, Principal of BHBCo joined us in a one-hour webinar COVID19 Effects on Mergers & Acquisitions, in which they discussed key issues and answered agent questions. We offer a brief synopsis of key discussion points as an introduction. You can view the entire webinar with Q&A below, which we highly recommend. In addition to being experts in M&A, both Everett and Tom offer an entertaining “frick and frack” presentation style, colored with real-world scenarios and observations.
They prefaced the webinar by saying that the economic climate is fluid and no one can really know the ultimate impact of Covid19, so the basis of their discussion would focus on real life examples of what they have been seeing in the market, what they’ve been hearing from buyers, and what they are seeing from actual deals. Emphasizing the fluidity of the current scenario, they caution that a presentation a month from now could be very different. They began with a discussion of what has and hasn’t changed with deals.
What hasn’t changed with agency mergers & acquisitions deals?
- Human nature. People do things to gain pleasure or to avoid pain.
- Micro vs macro-economics. Buyers and sellers make decisions despite the macro-economic winds. Deals continue.
- Resilience of independent agencies as a business model.
- The three key drivers of agency value – profit, risk, growth – remain.
What has changed with agency mergers & acquisitions deals?
- Uncertainty rules the day.
- Profit is on a “show me” basis. Buyers want to dig deeper.
- Risks are more challenging to quantify.
- Growth is nearly impossible to predict.
In terms of current activity of agency mergers & acquisitions examples they cited, they painted a picture of buyers who are more selective and taking a deeper dive on the specific lines and types of business in an agency. Sellers have fewer options but don’t have no options. Sellers can expect that the terms of deals are likely to be tougher and the multiples lower, at least over the short term. There may also be some deeper and hands-on involvement by the buyer’s lender in the due diligence process, something that would normally be unusual in such a transaction. On the other hand, the conservative approach and hesitancy of institutional buyers may present opportunities for the Main Street buyer. An agency buyer may see more value in the people assets of the selling agencies than just the math.
- Renaissance Alliance senior team’s op-ed on COVID19 agency planning published in Agency Checklists
- Drive these 5 Key Growth Levers to Accelerate your Agency Growth
- COVID19: Insurance executive perspectives about navigating the coming months in your insurance agency
- What’s your agency’s mindshare?