As year-end quickly approaches, many agencies are focusing on executing change to accomplish a few major goals. For some, it is hitting their 2014 financial expectations. 

Others are trying to motivate producers to close a few more deals. Still others are working internally to tweak expenses to eke out a little extra profitability. Many are reconciling premium volume and loss ratios with carriers to ensure 2015 starts off on a lucrative note when those contingency checks roll in. Producers are working on Jan. 1 renewals so the holiday season can be relatively uneventful from a retention perspective. Whatever the motivation, peak-performing agencies and their key employees will remain focused on growth and profitability through the 2014 finish line.

A select few—roughly 75-125 firms—will be working through a process to sell their firms—a business that was probably built from the ground up or has dined on a legacy spanning decades. The process they are embarking on is often unlike anything they have ever done. Owners will struggle with the emotional toil of the decision. Is it the right move? Is it the right time? Is it a sign of success? Is it a sign of failure?

As you wrestle with the merits of such a decision, consider a few tips as you contemplate the sales process:

Choose your advisor wisely. Notice I didn’t say: “Decide if you need an advisor.” This may sound self-serving, but every agency owner-seller should have a seasoned advisor to help navigate the seemingly unending, extremely complicated process. Just as your clients are not properly suited to work directly with a carrier for their insurance coverages, your background will not likely position you to be able to conduct a merger or sale alone. As you consider engaging an advisory firm, make sure you assess integrity, familiarity, relationships and the level of service the firm deliver. Don’t hire a yahoo to advise you on the divesture of your biggest asset. An advisor should be your advocate and drive the process for you.

Don’t let the legal process control you. Lawyers are very important in the process. Their main role is to protect your interests. They are essential to ensuring shareholders are shielded from unnecessary liability. However, transactions can easily get hijacked by the legal process. Many parties to a transaction choose to win each battle but end up losing the war. You must rationally gauge the importance of deal issues and focus intensely on protecting your business interests. Also, ensure that your attorney is willing to assist in the population and finalization of disclosure schedules to the purchase agreement. This is a key but often overlooked part of all deals. The schedules can be populated with the assistance of your advisor, legal team, and internal employees. However, you and your broker should take the ultimate responsibility for selling the firm. Make sure the legal counsel you select can work with others, as opposed to directing others, and is willing to roll up her sleeves and lead the completion of schedules to the purchase agreement.

Resist the urge to communicate too early. Agency owners struggle mightily with this one. They often feel like keeping the process a secret is a violation of their integrity or a betrayal of the bond with their employees. However, nothing good comes from communicating too early. A CEO that evaluates a deal to maximize shareholder value is fulfilling a fiduciary responsibility. Until a decision has been made, there is truly nothing to tell. You are simply exploring options for perpetuation. Most agencies get calls weekly from firms looking to acquire or about rumors they are selling. The only difference now is it may actually be true and the owner’s emotions are a bit more fragile than normal. Frankly, many owners look like a deer in the headlights at this stage. But premature communication can create unnecessary turmoil inside your organization and cause more stress for the ownership group and on the deal.

Remember this is your business and you are in charge, even during the M&A process. If you need or desire to sell your agency, choose an acquirer that aligns culturally, an advisory team that will drive the deal, and an integration strategy that sets up the business to perpetuate your legacy within the walls of a new buyer structure so you can reap the rewards you have worked so hard to earn.

Bumper Crop of Deals

As anticipated, it appears we are in for a very eventful finish to 2014. A total of 27 transactions closed in September bringing the annual total to 220. This is the highest September and highest nine-month deal count in a decade.

Arthur J. Gallagher (AJG) continues its domestic dominance with four acquisitions in September, bringing its deal total to 21 this year, which is 9.5% of all transactions. AJG continues to diversify its acquisitions with 10 p-c focused deals, seven employee benefits deals and four multiline. Among these 21 transactions, 15 were retail and six were wholesale.

AssuredPartners added two acquisitions in September bringing its annual total to 16. One of its new partners is Crawford Advisors, a roughly $12 million employee benefits firm out of Maryland. This acquisition was unique for AssuredPartners, which has not historically acquired all-benefits firms.

Acrisure continues its rise on the deal chart, completing three in September. The acquisitions are all in New York. This brings Acrisure’s annual announced total to 12. Hub International announced just one acquisition in September, also putting its domestic count at 12. Also making a move this month is Digital Insurance, which announced four deals in September, making for a total of six this year.

September’s crop affirmed our suspicions that 2014 will be another banner year in the M&A market. Buyer demand continues to be a key driver of pricing and activity. New acquirers continue to make waves, and the usual suspects have kept up their normal activity. The fourth quarter is set to create new watermarks in the M&A space. Stay tuned.