2017 Best Practices Study

• Create pre-arranged financing packages with set terms and interest rates for new shareholder purchases. These packages allow agencies to get out of the business of lending and focus on their core businesses.

There are numerous industry lenders to choose from, many of which are shown below. These lenders compete to lend to independent agencies because of the industry’s resilient growth, high profitability and low capital expenditure requirements. Internal perpetuation can be complicated and difficult, but financing internal perpetuation doesn’t need to be.

The ramifications of the private equity invasion and the heated M&A market are wide-ranging for agents and brokers. However, Best Practices firms are both responding to the challenges and taking advantage of the opportunities presented by the new marketplace realities. While acquiring may be more difficult, Best Practices firms are leveraging culture and a thoughtful prospecting process to maintain their share of deal activity. And while inflated valuations are putting pressure on internal perpetuation, Best Practices firms are understanding the economic case for private ownership and exploiting newly available financing options to make it happen. All things considered, the increased M&A activity and private equity investment point to a bright future for independent agents and brokers. Perhaps nothing highlights that better than the ability of the agent and broker universe to maintain its numbers despite heavy consolidation. With all this acquisition activity, many would think that the universe of small to mid-sized privately held agents and brokers is shrinking. In fact, there have been almost 4,000 new agencies and brokers established in the U.S. over the last five years. We believe that this is slightly more than the number of acquisitions completed during that same period. By our basic math, over the last five years, for every agency acquired a new agency was established.

1,918 Agencies sold (announced)

3,962 New agencies Established

1:1 Regeneration Rate

+1,918 Estimated agencies sold (unannounced) 3,836 Total agencies sold

Source: IIABA Future One Study, SNL, Reagan Consulting analysis