Everyone in the industry has heard stories of buyers succeeding in rolling up agencies and selling for huge multiples. I bet everyone has also heard the war stories of failed acquisitions – employees and producers jumping ship, carriers terminating contracts, [...]
In my post from October, I discussed debt coverage ratios and EBITDA multiples. Now let’s talk about projecting cash flow. I’m shocked how many buyers make offers without figuring out what the cash flow will be with financing. I’m not alone either. I’ve spoken with many loan officers that deal with the same issue. This article is long overdue.
Different lenders underwrite acquisition financing a little differently; however, they all typically want to stay under 6 x EBITDA on leverage. The reasoning is fairly simple…cash flow. As we’ll see below, agencies don’t cash flow well when they leverage themselves over about 6 x EBITDA. One of lenders’ key underwriting metrics is something called the debt coverage ratio, which is a measure of the cash flow cushion over debt payments.
Over the past 10 years I've worked on hundreds of M&A transactions within the insurance industry and a major reason most deals fail to get across the finish line continues to be timing. BusinessInsurance.com confirmed my opinion in an article [...]
This presentation discusses some best practices for growing (and managing) an independent insurance agency based on our interaction with agencies around the country as a valuation and merger and acquisition advisor.
Acquisition financing can be difficult to secure, but if the deal, including the person attempting to get financing, cannot get approved legitimately then it’s not meant to be. That is both a truth and a warning. Over the years, and [...]
View our video presentations on insurance agency valuations. Please give us a call at (321) 255-1309 if we can be of any assistance to you. Buying an Insurance Agency: Part 1 – An Introduction to the Agency M&A Market This [...]
The competition for buying an independent insurance agency is perhaps the highest among any industry for small business acquisitions. It is even more challenging if you are an agent that does not currently own an agency (i.e. not a strategic [...]
View our video presentation (bottom of page) and read the article below about what to consider before hiring an advisor to help you value, sell or buy an insurance agency. Please give us a call if we can be of [...]