2017 Best Practices Study

11.00x

11.00x

10.50x

10.00x

10.00x

9.75x

8.75x

9.00x

8.50x

8.50x

8.25x

8.00x

8.00x

7.50x

7.00x

6.75x

6.50x

6.50x

6.25x

6.00x

6.00x

5.75x

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Typical Guaranteed Price

Earn-Out Opportunity

Source: Reagan Consulting. Good quality agents and brokers, $3-$10M in revenue

How long these extraordinary multiples – and extraordinary activity levels – last will depend upon the persistence of public broker valuations and the continued appetite of private equity-backed acquirers.

As we move forward, all eyes should be on the PE segment. A significant pull-back by the PE buyers would have a dramatic impact on overall activity and agency values. PE activity would likely be negatively impacted by a sharp decrease in public broker values or substantial increases in interest rates. Barring these or some other seismic economic, political or geopolitical event, the records being set for deal activity and broker valuations will likely continue.

The good news for Best Practices agencies and private brokers is that, despite a frothy marketplace teeming with well- capitalized buyers, they continue to get their share of deals. In 2016, privately-held brokers accounted for 21% of all announced transactions, a much higher percentage than banks and public brokers combined. Privately-held brokers have remained relevant in the marketplace as buyers and are, in fact, thriving. Even as competition has increased dramatically, private brokers have held their ground. Total deal activity by private brokers exceeded 300 announced transactions from 2014 to 2016, easily the highest three-year total on record. Today, privately-held brokers are firmly established as the second most active buyer group in the marketplace, trailing only the PE buyers. Privately-held brokers are once again on pace to do over 100 deals in 2017. That would mark the fourth time in the past six years they have reached that level.