THE ROLE OF AN ADVISOR IN AN INSURANCE M&A TRANSACTION

Having an experienced M&A advisor, proficient in M&A strategies and integration, is critically important to the success of an insurance distribution mergers and acquisitions (M&A) transaction. Making the decision to sell a firm is a complicated and often an overwhelming personal decision for sellers. So, it’s important to seek out an expert opinion from an insurance industry M&A advisor

An M&A advisor is responsible for providing objective advice on the legal, regulatory, commercial, and financial considerations relevant to the deal. This includes structuring and negotiating the transaction, financial due diligence, helping with the integration of the entities post-closing, and ensuring that the financial obligations associated with the transaction are fulfilled.

Before you evaluate a potential M&A advisory firm, make sure you have a clear understanding of an advisor’s role and your expectations for their responsibilities. What follows below are some of the basics on an M&A advisor’s role, including the processes for financial valuation, due diligence, negotiations and how to select an advisor that can create more value in a transaction versus going at it alone.

WHAT ARE M&A ADVISORS?

M&A advisors offers expertise and guidance to insurance distributors and intermediaries throughout the entire process of a sale. Every firm that is evaluating a potential sale of their business has different goals and aspirations as it relates to a transaction. An experienced M&A advisor will:

• Dedicate the requisite time to understanding the client’s goals and objectives
• Educate the seller on the wide range of potential options as it relates to buyers
• Organize the necessary critical financial metrics that matter to determining valuation
• Deliver necessary confidential information to position the business properly in the eyes of a potential buyer
• Help negotiate critical financial deal terms
• Manage all related parties in the transaction
• Help support the firm during buyer due diligence
• Ensure the client finds the ideal partner for their business
• Support their clients with post-close financial consideration and calculations as it relates to earnout payments

When the right advisor is engaged, sellers should expect the following results:

• Deal tracking and data management used to help drive additional value
• Pricing security from LOI to close
• Legal handholding
• Speed of deal execution
• Non-financial deal terms support
• Delivering issue resolution throughout the entire process
• Deep understanding of the buyer landscape
• Multi-person deal teams
• Pro forma expertise

Working with Marshberry’s insurance M&A advisors gives you personalized solutions, decades of experience, and connections across the industry.

Financial, operational, and growth-related analysis in insurance industry M&A transactions

For anyone selling their business, valuation is one of the most important factors in considering selling the business. To ensure your merger or sale of your business is economically beneficial, your M&A advisor should understand the important drivers of valuation and help the selling firm navigate those levers properly.

Often, sellers without advisors, mishandle the process or misunderstand the true components of valuation methodology, leaving a lot of money on the table. For many buyers within this industry, different qualities and characteristics are more attractive when they evaluate how to value potential sellers. An experienced advisor, who understands the industry can drive a significant increase in overall potential financial opportunity.

The proper M&A financial analysis should identify factors for determining the fair capital market value of a company. An experienced advisor knows how to identify these factors which helps drive a higher value for the company. A firm that is specialized can also provide relevant benchmarks and perspective as it relates to specific valuation attributes and deal nuances that impact overall deal success.

Due diligence in insurance industry M&A transactions

Once a seller finds the right buyer and the requisite documents are executed to ensure exclusivity, the buyer will begin formal due diligence. Due diligence is a thorough assessment of the M&A transaction before the deal is complete. This process can be exhaustive and extremely intrusive for sellers, but it is a necessary part of any deal and an important part of giving the buyer comfort that your business will continue to perform as positioned.

An experienced M&A advisor will prepare the potential seller on the intricacies of pending diligence and take a proper approach to building the financial package on behalf of the seller. This process reduces risk and creates an overall better diligence experience for both the buyer and the seller, which leads to a shorter timeline to close.

Another aspect of due diligence is data management. Integrating your agency’s data with another business is a tricky process. An M&A advisor can help you identify what data has been collected, the best repository for housing data assets, even the experts who will manage and update data.

Deal negotiations in insurance industry M&A transactions

M&A advisors will structure a deal to clearly layout the rights and expectations of both buyer and seller. During deal discussions, they should ensure must-haves are met, beyond just a good value.

You should walk away with a deal that gives you reassurance – plainly documented – that you’ve done the right deal.

Choosing the right advisor for insurance industry M&A transactions

Insurance M&A transactions come with their own unique challenges and opportunities. When considering an advisor, look for advisors who have experience creating detailed plans in the areas of strategic planning, valuation, due diligence, and deal structuring specifically in the insurance industry.  Research an advisor’s firm and background to ensure their values and tactics align to your agency. Consider questions such as:

• Does their strategy appear thorough, smart, and well-defined?
• Have they clearly communicated their methodology?
• Do they have a proven track record of successful insurance M&A transactions?
• Is their approach ethical and trustworthy?
• Do they have a plan to retain and attract customers?

Conclusion

MarshBerry offers comprehensive insurance-based M&A services that guide you through the entire process. We also offer buy-side advisory, sell-side advisory, and investment banking services. Our M&A consultations are tailored to meet the specific needs of your agency to help uncover a competitive and profitable offer.

The right mergers and acquisitions consultant will seek to compliment your agency’s success through effective M&A strategies and seamless M&A integration with a new partner, or secure the future of your business post-sale. Contact an M&A advisor at MarshBerry and gain a trusted advisor dedicated to your goals.