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Monday, April 20, 2015

Reagan Consulting M&A Workshop - Characteristics of Acquisition Targets

This week, ABIA staff is attending the Reagan Consulting Mergers & Acquisitions and Perpetuation Workshop in Atlanta, GA.  Though the focus is broadly on insurance brokerage, there is a lot of information that is useful for bank insurance, particularly at a time when banks are looking to grow through acquisition.

Banks own 15 out of the top 100 brokers in the country. They are a critical player in the insurance brokerage industry - and a player that is looking to grow both organically and through acquisitions.
There is a big market of potential acqusition targets and acquiring agencies is the most effective strategy for growing noninterest income through insurance. There were more insurance brokerages in 2014 in every revenue category from $1.25 million and up.

The difficulty for banks is that the population of buyers has changed dramatically since banks started buying. In a comparison of buyers from 2006 to 2014, banks and private equity have switched places. In 2006, banks did 29% of deals and by 2014 only completed 5% of deals. Private equity firms bid up the price on agencies, often pricing banks out of the deals.

Reagan highlighted some characteristics of firms that may be ready to sell with one being firms with owners that are employee benefits producers.  Many firms with strong employee benefits practices have rewarded their producers with an ownership stake. With such massive changes in the employee benefits world, these companies may be open to selling.

Another characteristic of firms that may be ready to sell are firms owned by baby boomers. Often fiscally conservative, these firms may be looking to cash in on their life's work.  These firms may not have implemented good perpetuation strategy, an important topic of conversation throughout the Workshop.

ABIA members can take advantage of one hour of consulting with Reagan Consulting as a benefit of ABIA membership. Jim Campbell, Partner and head of Reagan's bank practice, is a favorite speaker at ABIA events often speaking at the ABIA Annual Conference and paneling ABIA Best Practices Panel, "Competing with Agency Acquisitions".  You may download the recording and view his presentation here.