The first thing we need to understand when working with you is to learn what your goals are for yourself and your firm and see if they align with ours.  If our goals are not the same, no deal could ever be struck between us that would stand the test of time.  The only firms we are interested in buying are those where we feel absolutely comfortable that we can meet the seller's needs and that their agency will meet ours.  We are not interested in making transactions.  We are interested in building long term successful partnerships.  For this to happen, both parties to the agreement must get what they want from it, feel they were treated fairly, and be satisfied that it was the right deal for them.

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Once your goals and expectations are understood, it is worth looking at the various strategies of the most prominent acquirers of independent agencies in the market today and see how their plans match up with yours.

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THE NATIONAL INSURANCE BROKERS

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These are large national firms that have likely been built over time through a series of acquisitions of local and regional independent insurance agencies.  They may be publicly traded companies or privately held.  They typically offer many advantages to a seller.  They usually have the funds to pay a competitive price and have experience in closing the transaction.  They often have robust infrastructure, capabilities and resources to offer the smaller agencies that they acquire. 

 

Unfortunately, many of these firms also have a distinct corporate model, rigid culture and way of doing business to which you and your agency will eventually have to subscribe.  Unless your agency will make up a very sizeable portion of the combined company, you should be prepared for the likelihood that your agency, its business, employees and culture will probably not be as important to the acquirer as they are to you, especially over the long haul.  You and your employees will be working for a large corporation and not the small, friendly and entrepreneurial agency previously owned and controlled by you.  To some degree, you will likely be trading autonomy and control for added resources and cash.  How this is likely to be received by your employees, your clients and you is something that should be well considered. 

 

It would be unrealistic and naïve for you not to at least consider the possibility that in a relatively short time after the sale, a national insurance broker will probably dramatically change your agency, including its way of doing business and its staff.

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THE LARGE PRIVATE EQUITY AGGREGATORS

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Very large, private equity backed agency aggregators typically make hundreds of acquisitions each year.  If you are expecting individualized attention and support, you'll likely be disappointed.  It is nearly impossible for a large aggregator to digest and serve hundreds of separate new acquisitions each year.  While you may receive a healthy purchase price for your agency, many sellers report that they receive little value after the sale from their new owners.  Do you want to sell to buyer that isn't interested or capable in being a real partner to help you grow the firm?

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As these private equity backed buyers grow ever larger, there are effectively only two scenarios for them to realize the value of their investment.  Either sell to a large national broker or go public themselves.  Ask yourself whether either of those scenarios are likely to be happy experiences for you, your employees and your clients.

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THE BANKS AND BANK HOLDING COMPANIES

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Banks have been very active in recent years in acquiring independent insurance agencies but have also been almost as active in divesting them as well.  Their strategy has typically been driven by a desire to use independent agencies as a means to deepen their relationships with their existing customers by offering them insurance products in addition to traditional bank services.  To a much lesser extent, some bank acquirers have also sought to make bank customers out of the agency's clients. 

 

Few bank acquirers have successfully achieved these goals to date.  Bank and insurance agency cultures are very different.  What makes a great bank client does not always make a great insurance client and vice versa.  Employee compensation and work environment differs greatly between banks and insurance agencies.  In most cases, agency staff is much more highly compensated than bank staff and very often, even bank leadership.  This disparity is apt to cause problems in keeping both parties to the transaction happy with their deal over time.  The most successful bank acquirers of insurance agencies have actually been those who have not sought to integrate the operations and cross sell the customer base, keeping agency operations separate and relatively independent from bank operations. 

 

Even those banks that have kept their insurance agency operations separate are rethinking their commitment to the insurance business following the burdensome regulation which came out of the recent bank financial crisis.  Some are concluding that they cannot stay in the insurance agency business without regulatory risk.  Most insurance industry analysts expect banks to be net sellers of the independent insurance agency operations they have acquired over time for these reasons.  Some considerations here are obviously whether you, your employees and clients want to be controlled by an entity that doesn’t really understand your business yet wants something from purchasing you that you might not want to or be able to deliver.

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LOCAL & REGIONAL AGENCY COMPETITORS

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Of course, many agencies often sell to or merge with other agencies in their community.  This can be highly beneficial or have major drawbacks.  You may not want to signal to your local marketplace and competitors that you are considering selling.  If this got out it might result in some of your competitors trading on the rumor by attempting to “take” your business rather than pay you for it.  There is the possibility that no local agency acquirer is suitable to you or that you might find working for those that have previously been your competitors somewhat distasteful.  With an agency to agency acquisition, the seller always has a concern about whether the acquiring agency has the capital to fully complete the transaction as promised.  How insurance carrier markets will view the transaction is often a worry.  Will they support it or cancel contracts and if they do, how will that affect your business and sale proceeds?  While selling to a local competitor may be a great option for some, it isn't for every agency seller.

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INTERNAL PERPETUATION PLANS

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Many agency owners have successfully sold their interests over time internally to the next generation inside of their own agencies.  Transferring ownership through an internal perpetuation plan can be very rewarding for the buyers and usually creates the least amount of disruption and change for the agency's staff and clients.  In some situations, it may also be the preferred way for the agency owner to monetize their investment in the agency, especially if they are being bought out by their own family members or long time trusted associates.   Undoubtedly, this option also carries perhaps the most risk to the agency owner / seller.  In most cases, this option pays the owner / seller the least attractive price for their asset of all the other options available to them.  Since it often takes place over a long period, the owner /seller must be concerned with the ability of the next generation to meet their purchase obligations.  There are so many stories and examples of how the next generation crashed and burned the agency after taking control and were then unable to complete paying off the preceding generation.  Who wants to come out of retirement at 80 years old and try to take back the business they thought they sold years earlier because they weren’t fully paid?  And what business is likely to be left to take back, even if the former owner / seller could come back after years of inactivity?  This is not a possibility most consider when transferring ownership through an internal perpetuation plan.  How confident and trusting are you in those inside the agency to whom you would be selling your interests?

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CULPEPER INSURANCE PARTNERS

 

If you have considered the advantages and disadvantages of the various other agency acquirers out there and not found a solution you are comfortable with, then we may be the right option for you. Culpeper can most definitely be competitive with what other acquirers will pay for your agency.  Our value to you, the employees and clients you care about is as much about what we won't do as what we will do after the sale.

  

We are not a large corporate insurance broker seeking to impose their corporate model upon the agencies we acquire seeking blind conformity.  You and your team will be treated and supported like business partners, not just transactions.  Unlike the bank acquirers, we have no agenda for bolstering our (non-insurance related business) through the acquisition of your agency nor are we concerned that you and your staff earn more than we do.  There is no unwelcome competitive history between us and your agency.  We don't compete against you now and haven't in the past.  Talking to us and eventually selling to us will not damage your confidentiality, viability or credibility in the marketplace.   We offer our partners a seat our leadership table and the opportunity to truly shape the direction of our company.  That leadership role is rewarded with equity in our company that allows you to share in our collective success even after you've sold your agency.  At Culpeper, without question, we have the capital to complete the transaction as promised.  You'll have no worries about whether, how or when you'll be paid.  We will value your agency's culture and relationships and try to make them our own.  Because we are private, independently owned and seeking long term success over short term gain, we will invest in the business over time and take a long-term view.  We will never sacrifice people, relationships,  compromise our ethics or break our promises just to “make” quarterly earnings goals.

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TEN THINGS THAT MAKE CULPEPER INSURANCE PARTNERS DIFFERENT

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1.  We understand independent insurance agencies and brokerage firms as that is our only business.

2.  We believe in growth but understand it can only come from truly caring about clients and serving them well.

3.  We recognize and value your agency's culture and seek to meld it with ours, not change it to conform with ours.

4.  Our pricing of your firm is competitive with any other acquirer in the marketplace today.

5.  We have the capital to pay and can structure long-term deals that include you in the future profits we earn together.

6.  We are profit focused but take a long-term view meaning that we are prepared to invest in the future.

7.  Relationships and people matter to us.

8.  Your employees and clients are as important to us as they are to you because they are the key to our on-going success.

9.  We do things the right way even when it is far more difficult or less profitable.

10.  There is simply no price worth compromising our reputations and our ethics are never for sale.

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