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MARSHBERRY PUBLICATIONS
For The Record: A MarshBerry Publication: Where does the Dollar Go?
March 2012
Expense control is a critical component to establishing consistent financial performance. Understanding which expenses have the greatest impact on performance allows agency owners to make more informed decisions to enhance profitability.
Dealmaker’s Dialogue: A MarshBerry Publication: The Year of the Employee Benefit Divestiture?
March 2012
The number of transactions involving employee benefit brokers continues to climb, even as the industry apprehensively waits for this month’s opening arguments in the United States Supreme Court Cases. During 2012, employee benefit deals have accounted for 50% of the transactions completed by the top three brokers.For The Record: A MarshBerry Publication: Valuation Risk
February 2012
There is a misconception in the marketplace that insurance agency valuations are strictly based on an agency’s current financial statements. The reality is that two agencies with the same revenue volume and EBITDA margin (Earnings Before Interest Taxes Depreciation and Amortization) may generate very different values.Dealmaker’s Dialogue: A MarshBerry Publication: Multiples on the Rise
February 2012
By now you have certainly heard that the number of deals completed in 2011 was significantly higher than in prior years and almost reached the record number of transactions that occurred in 2008. What is even more interesting than the increase in deals completed are the multiples that were paid for those transactions.For The Record: A MarshBerry Publication: Reliance on Contingent Income
January 2012
For many independent agencies and brokers, contingent payments represent a substantial portion of top-line revenues and are integral in supporting pre-tax profits and owners’ compensation. The reduction or elimination of contingent income would have a profound personal impact on the average agency owner and in some cases, deliver a crushing blow to the agency’s balance sheet.Dealmaker’s Dialogue: A MarshBerry Publication: The Rising Tide of Transactions
January 2012
2011 marked a strong year of deal activity in the insurance brokerage space. Brokers continue to look to acquisitions as a way to supplement weak organic growth and with a more positive outlook in the economy, more buyers are willing and ready to buy.For the Record: A MarshBerry Publication: Hit Your Numbers in 2012
December 2011
Growing organizations concentrate on what they can control year in and year out. Economics 101 says that if you need to reach your organic growth goal, the options are to increase price, add new products or sell more existing products. In the insurance world, the best option is to sell more existing products. The other two options are limited.
Dealmaker's Dialogue: A MarshBerry Publication: Internal and External Value: Narrowing the Gap
December 2011
It is no secret that the value agencies use for internal perpetuation is usually much lower than the value attainable in an external sale. The difference is often chalked up to higher multiples that an external buyer will apply for strategic reasons. Higher multiples do play into the stronger valuations in an external sale, but an equally important factor is that agencies that sell externally achieve higher profitability than is the case in an internal perpetuation.
For The Record: A MarshBerry Publication: Perpetuation - Stay the Course
January 2011
In a recent survey of insurance agency owners, MarshBerry asked, "How have the current economic conditions impacted your perpetuation plans?" At first glance, it was surprising to find that only 22% of agencies had indicated that their plans were put on hold, slowed down, or cancelled altogether. A significantly higher 78% indicated that the economic downturn had no impact on their perpetuation plans.
A MarshBerry Publication: Dealmaker's Dialogue - Let the Deals Continue
January 2011
2009 marked the lowest number of insurance brokerage deal closings in the last ten years. The financial collapse, lack of capital and depressed valuations slowed transaction closings in most industries.
For The Record: A MarshBerry Publication: Roadblocks to Perpetuation
December 2010
Several obstacles exist relative to internal perpetuation. The graph below outlines the primary reasons cited by agency owners: (see full article).
Dealmaker's Dialogue: A MarshBerry Publication - Year in Review
2010 began with M&A transactions closing at numbers consistent with the low levels seen in 2009. Deal count remained low in the first half given uncertainties about the economy, healthcare legislation, and weak pricing offered by buyers. Activity began to increase mid-year and now there is a firestorm of activity taking place. If all of the deals currently under letters of intent are consummated this year, the number of publicly announced transactions in 2010 will show a healthy increase over 2009 results, although not back up to 1999 - 2008 levels.
Dealmaker's Dialogue: A MarshBerry Publication - Creative Deal Structuring when Stock is Currency
November 2010
The utilization of a contractual agreement known as a collar can be a useful tool when dealing with a buyer who is using publicly traded equities as consideration within a transaction. A collar can customize a transaction to limit buyer and seller risk due to fluctuations in the buyer's per-share price as determined by the public exchange on which it trades.
Dealmaker's Dialogue: A MarshBerry Publication - Fighting Over Revenue
September 2010
One of the most contentious areas of valuation and negotiation in a deal is revenue recognition. Relevant points of view include how the buyer and seller recognize revenue, along with negotiating the post transaction accounting methodology for the acquired entity.
For the Record: A MarshBerry Publication - Optimizing the Select Unit Threshold
September 2010
High-growth insurance agencies have a select unit in both commercial lines and health insurance. A select unit is comprised of accounts below a certain commission dollar amount (select unit threshold) that are handled by dedicated and segregated service staff. Select unit accounts are not comingled with producer books of business and producers do not receive renewal commission on these accounts.
For the Record: A MarshBerry Publication-Account Retention Analysis
August 2010
Account retention serves as the foundation for revenue growth. And when we analyze account retention, The Pareto Principle rules. The top 20% of your organization's accounts most typically represent 80% of the firm's revenues. The same percentages apply to departmental and individual producer books as well. Thus, your core institutional account retention focus should reside on the Top 20% of your accounts.
Dealmaker's Dialogue: A MarshBerry Publication-Protecting Your Investment in an M&A Transaction
August 2010
Prior to buying a new car, an informed consumer typically asks about the warranty associated with the purchase. The automobile industry has dictated a standard package of 3 years or 36,000 miles of bumper-to-bumper coverage for any new car. This means that if something happens to the car (that is not the fault of the new owner), the Seller (dealership/manufacturer) has the responsibility to cover any costs associated with fixing the car. Buying or selling an insurance agency is no different.
For the Record: A MarshBerry Publication-Organic Growth - Belief, Focus and Perseverance
July 2010
Never in history has the insurance industry faced such a difficult environment. The prolonged soft market, limping economy and widespread exposure compression have wreaked havoc on organic growth metrics and morale. To add insult to injury, now agency owners must figure out how to navigate through health care reform and increases in taxes on both ordinary income and capital gains. It is possible to grow through this challenging cycle, but not by accident.
Dealmaker's Dialogue: A MarshBerry Publication-Due Diligence - Prepare for Success
July 2010
With proper preparation by both sides, the pain associated with due diligence can be minimized. The first step in this preparation is to gain an understanding, in advance, of both the overall process of due diligence and the key areas that will need to be reviewed.
Dealmaker's Dialogue: A MarshBerry Publication-Stock Purchases versus Asset Purchases
June 2010
One of the first questions we ask a seller is, "Are you a C-corporation, S-corporation, LLC, partnership or sole proprietor?" Corporate structure is the primary element that steers a transaction toward a stock purchase or an asset purchase.
For the Record: A MarshBerry Publication-Producer Book Benchmarking
June 2010
As producers seek to grow their book and maximize W-2 income, there are two fundamental issues. Either there are not enough accounts in the book or the existing accounts are too small, therefore consuming capacity.
Eqecat: An ABS Group Company Activity of Catastrophic Windstorm Events in Europe in the 21st Century
June 2010
To develop a broader understanding within the re/insurance industry of the impact of climate change on catastrophic windstorm events in Europe, and to explore the applicability of certain aspects of the current state-of-the-art climate modeling to insurance-oriented loss simulations, EQECAT is collaborating with the Free University of Berlin (FUB) to investigate the behavior of the current and future activity of extra-tropical cyclones, as simulated by Atmosphere Ocean General Circulation Models (AOGCM). This white paper presents the results from the first phase of this study.