Handing over your company to a strong external buyer can be a good decision aligned with your company’s lifecycle. However, when the time comes to transfer ownership, many sellers, feeling a sense of satisfaction and certainty upon receiving concrete interest from a potential buyer, tend to accept the first offer that comes their way. This feeling is even stronger when the offer aligns with or surpasses their expectations of the business’s value. One key reason sellers frequently accept the first offer lies in the concept of cognitive bias. The inclination to “trust your gut” is a common heuristic shaped by personal experiences and instincts. While this approach may feel natural, it doesn’t always lead to the best outcomes.
Keep all options on the table
In a business sale, buyers generally fall into two categories: strategic and financial. The insurance distribution market is currently dominated by strategic buyers—larger brokers, often backed by private equity (PE), actively seeking to acquire smaller firms. In most cases, your first offer will likely come from a well-known strategic buyer in your region. While each strategic buyer has its own unique approach, they all share a common focus: integrating your business into their existing operations to achieve synergies and accelerate growth. Strategic buyers can be domestic or international, operating in either horizontal or vertical markets, and often differ in their cultures, strategies, and operational or financial goals. While some strategic buyers implement significant changes from day one, others prioritize preserving the entrepreneurial spirit and granting as much autonomy as possible.
Financial buyers typically do not operate insurance brokerages themselves and instead view acquiring a company as an investment opportunity. Financial buyers are usually PE firms, family offices or venture capital firms. Historically, these buyers have targeted large corporations, but growing competition has shifted their focus to smaller market segments, increasing demand for broker businesses with revenues starting at € 3 to 5 million, depending on the entrepreneurial spirit of the seller, the territory and portfolio characteristics. Unlike strategic buyers, financial buyers aim to enhance the standalone value of your business and often provide better opportunities to retain management or equity. Unfortunately, many insurance brokers overlook financial buyers, mistakenly assuming their company is too small or lacking the necessary network to connect with this buyer segment.
It is important to keep all options on the table when selling your company. Evaluate different types of buyers, both strategic and financial, and explore a range of transaction structures. These could include a partial sale to your management team or key employees, selling a minority equity stake, partial recapitalization, leveraging debt or share redemption to extract capital from the business, or structuring appealing earn-out arrangements. A well-executed sales process thrives on creativity and innovative thinking, often uncovering unexpected opportunities and delivering outcomes beyond initial expectations.
The broker formation alternative
An often-overlooked alternative in business sales is the concept of broker formation. Many insurance brokerage owners focus solely on their individual situations, unaware that peers in their region or insurance vertical often face similar challenges. By coming together and pooling resources, brokers can create a stronger, more competitive group that not only enhances their market position but also becomes a highly attractive investment opportunity.
Many of the major broker platforms originated from the broker formation processes. For instance, The Ardonagh Group was established in 2017 following a two-year broker formation initiative and now ranks as the sixth-largest insurance broker in the European market. Similarly, both the PIB Group and Markerstudy share comparable origins.
In a broker formation, the firm will integrate their business into a larger entity, fostering collaboration and shared growth. Instead of selling the company outright, owners exchange ownership for shares in a newly formed broker platform. This approach allows firms to remain actively involved as entrepreneurs while benefiting from being part of a larger, more robust organization. Typically, a financial buyer (sponsor) is introduced to provide investment capital, enabling the new company to innovate and acquire additional brokers, fueling further growth.
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