In 2015, at the age of 27, I started my own firm, and soon after found myself at a surprising crossroads: Should I sell my company?
National Insurance Consulting Group landed on Inc.’s list of the fastest-growing companies in America just four years after launching. I didn’t realize the value of what I had built until I got a cold call from one of the larger publicly traded firms, which got me thinking about monetizing all that entrepreneurial sweat equity.
The intrigue was there, having heard about all the roll-ups, consolidation plays and success stories of investments made in company stock. The best example of this in our industry is Acrisure, which has completed nearly 500 acquisitions. There’s no denying the power of being able to cross-sell and collaborate with like-minded professionals and entrepreneurs. The value of each acquisition is in the human capital and relationships that have been built up over time.
Insurance industry multiples have never been higher, and they keep rising with no end in sight. In fact, what’s happening now is smaller firms are becoming targets. M&A activity among North American agents and brokers was 30% higher in 2021 than the previous year, according to OPTIS Partners’ M&A database. There are more than 30 private equity-backed acquirers that are probably driving most of these transactions.
All of these developments convinced me to eventually accept an offer. My second child had just been born, and the time felt right to take my career to the next level. I entered the deal thinking the rest of my life was going to be amazing. But before long, everything went sideways.
I was forced out as CEO without any clarity as to why that was decided, a move that, in my opinion, would only be understandable if an egregious crime had been committed. I was faced with complete illiquidity and the threat of a seven-year non-compete agreement, locking me into litigation to determine if I was even allowed to earn an income for my family.
It was probably the hardest experience I’ve ever gone through in my life. But it inspired me to build a different model to ensure it would never happen again. My vision was to create a market-leading organization that empowers entrepreneurs and values their opinions, while providing liquidity and tremendous upside potential.
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Purchase price should not be at the top of the list when determining your future partner, unless the owners are retiring. It’s important to spend meaningful time getting to know one another and ensure that your visions are aligned. Two- or three-hour meetings that investment bankers routinely coordinate are woefully inadequate. Numerous reference checks are also critical and may include contacting people who were let go by the acquiring firm and learning why that was the case.
Another point to consider: if you don’t have a trusted adviser or ally who has sold their business in this specific industry, how do you know you’re getting anywhere near the deal that you deserve?
People often talk about their pandemic pivot. Mine was that I went from selling my company and managing the fallout of a raw deal to going on an ambitious acquisition spree. Over the past year I’ve completed several M&A transactions through stock swaps. My intent is to build an industry powerhouse through acquisitions that fuse the traditional insurance agency with a professional employer organization as part of an organic growth strategy.
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The new (and rapidly growing) organization includes producers who have already had the experience of building a top-50 insurance agency. Our model allows each firm to increase its revenue per relationship. But the even bigger value is in digital marketing, wherein partners would keep their brand name and autonomy with a revamping that accommodates mobile apps and even digital procurement of insurance.
It isn’t about titles or hierarchy; just building a great place for people to strategically collaborate without having to worry about losing their livelihood.
We acquire books of business as long as one of our partners would take that over and the seller commits to working out a transition plan that won’t erode their purchase price just because they are retiring. Sellers also have an opportunity to keep their autonomy, brand name and culture with full access to capital and partnerships with PEOs that distribute almost exclusively through brokers.
Today’s hyper-competitive market has made integrity a true differentiator. If you find an acquirer that is radically candid, learn to appreciate that. Trust is critical and unwavering integrity is hard to find. Serving this industry helps us all better understand the value of human capital. After all, it is through inspiring people that we come to believe there is no such thing as impossible.
