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Should you buy, sell or merge?


In just the past five years, a challenging economy, competition and financing have led a number of independent marketing organizations to rise and fall, merge or sell. At the same time, as an aging industry, the field force and owners entering their 50s and 60s are in search of an exit strategy that allows them to receive payment for the value of the businesses they have built.

So as you plan for the future, you may want to consider buying, selling or merging.

Buying or merging agencies doesn’t have to cost much. You can use shares of your own company in cases where the previous owner is going to continue working with you. And if the past owner is not going to continue working, you can create earn-outs, consulting contracts, balloon payments, or they can carry the note for a certain number of years.

Every agency’s growth plan should include possible purchases and mergers. Agencies can create synergies, get talent, and create an instant distribution channel far more quickly through a purchase or merger than by doing it organically. Succession plans can be created by merging companies and having partners.

As an agency owner, you need to think about where the company is headed. What’s the end game? What are you building?

Build to sell: This has worked well for many people—especially before the current economic downturn. There are always buyers for a profitable, well-run company. If that is the goal, once the distribution and production bases are created, expenses should be lean and mean. Remember, the only way to create profit for the owner or a potential buyer is to increase revenue or decrease expenses.

Build for the future: This used to happen a lot with children taking over the family business. It was business as usual from generation to generation. But today’s agency is so much more complex than just 10 years ago that many children are not capable of taking over. Or, just as likely, they do not want to take over the family business. Some owners are better off selling the agency and helping their children in another business venture.

Build for a job: Many owners may have built their agency because it afforded them the opportunity to own their own company and have the freedom to do anything they wanted. Many of these people don’t have a succession plan and have no one to take over in case of a catastrophic illness or death.

Understanding the real reasons behind why an agency was built provides important indicators to determine the best means to grow, adapt and navigate future changes. It will also help you understand how or if you want to approach a future merger or acquisition.

Scott Tietz, CLU, is president and CEO of Partners Advantage Insurance Services, LLC in Colton, Calif. He recently published a book called "Mergers & Acquisitions 101: What All Independent Marketing Organizations Need to Consider to Survive and Thrive in Today’s Changing Landscape." Reach him at

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