There are many misconceptions about mergers and acquisitions. Understanding the ins and outs of selling a business — and separating the myth from reality — can go a long way when you’re considering selling your firm.
Strategic buyers will have a team in place to help you through the process. Here are seven debunked myths that will shed light on what actually happens during the sale of your business.
Myth 1: You should only sell your firm after coming off a really good year.
Reality: Since most acquisitions are done on an earn-out basis, this is partially true. When it comes to mergers and acquisitions, long-term buyers look beyond one year of sales.
Remember: Why you sell is just as important as when you sell. The earnout provision in your contract should detail the additional compensation you will get if your business achieves or exceeds its financial goals. As a result, you have the potential to make a profit even if your business has an average year-over-year gain after the sale — and you join someone that can help you grow your business.
If you join the firm that acquires your company, you will get the opportunity to help grow your firm, which will help add to your purchase price at the sellout time.
Myth 2: Your team is going to be unhappy.
Reality: Many insurers think their team will take the sale of the firm negatively, but the truth is that some teammates will be pleased about it. Your team is made up of intelligent professionals, and with your help, they will be able to see the positives of an acquisition.
Myth 3: I have to take stock as part of our purchase price.
Reality: Not in all circumstances; some buyers pay in all cash, including Brown & Brown.
Myth 4: All purchase structures are the same.
Reality: Thoughtful buyers can customize the purchase structure to accomplish the goals of the buyer and the seller.
Myth 5: Nothing is going to change.
Reality: If a buyer tells you this, know that it’s untrue. Each buyer will have different levels of change based on their operating structure, culture and how they run their business overall.
Myth 6: Everyone’s compensation must change after the acquisition.
Reality: Don’t assume everyone’s compensation level will change after the acquisition is finalized. Every acquirer will have their own compensation structure. Some acquirers will grandfather in the salaries and benefits of employees transitioning with the company.
Myth 7: I will lose my legacy if I sell my business.
Reality: Your legacy is your people. Selecting the right buyer and setting your team up for long-term success with a forever company will extend your legacy.
The Takeaway
Insurance agency sales can be complex, but they don’t have to be.
If you are considering a transaction, taking the time to separate the myths from reality will make the process go much more smoothly. If you want to ensure that your team, customers and local community will remain a priority after the sale of your business, consider joining the Brown & Brown team.
Interested in speaking with our Mergers & Acquisitions team?
Email [email protected] or contact us directly below.
Vaughn Stoll
Senior Vice President & Director of Acquisitions
[email protected] | (386) 239-8899
Mark Prampero
Regional Director of Acquisitions
[email protected] | (386) 239-7292