Agency Value and
Buying an agency? How much should you pay?
Amidst the frenzy of mergers and acquisitions, and with the push agencies are feeling to grow quickly, many agency owners are facing the daunting task of buying other agencies. How do you know how much to pay? How do you know if the deal makes sense for your agency? How do you structure the deal? This presentation answers these questions and more, in detail. Audience members will learn:
Every agency is unique. Therefore, a buyer’s valuation and a Fair Market Valuation are different. Every agency is worth more, or less, to a specific buyer, which means a buyer specific appraisal is critical to a successful acquisition. In fact, studies show that as many as 90% of all agency acquisitions have a negative return on investment. Our experience suggests that one reason many of these acquisitions lost money was because they did not use a buyer specific appraisal.
The ingredients of an accurate valuation and what a buyer must consider when looking at an agency.
How to structure the deal. While most acquisitions lose money, buyers can often pay a high price and still make money if they structure the deal differently.
How to structure deals correctly so that buyers and sellers both make more money.
Establishing & Maximizing Agency Value
Agencies are usually the most valuable asset agency principals will ever own. Many owners work their entire lives to build their agency’s value and then depend on the revenues from their agency’s sale for retirement. Therefore, maximizing the agency’s value and structuring the sale correctly are absolutely critical. This presentation covers these items in detail. Audience members will learn about:
Establishing agency value: Often, agency values are determined by using an average multiple. Every agency is unique, therefore using an average usually is grossly inaccurate. Chris covers the ingredients of an accurate valuation.
Value for a buyer: Every agency is unique. Therefore, every agency is worth more, or less, to a specific buyer, which means a buyer specific appraisal is critical to a successful acquisition. Chris discusses how a buyer’s valuation and a Fair Market Valuation are different and what a buyer must consider when looking at an agency.
Structuring the sale: While most acquisitions lose money, buyers can often pay a high price and still make money if they structure the deal differently. Participants learn how to structure deals correctly so that buyers and sellers both make more money.
Maximizing agency value: Because most sellers will not be selling their agencies for a few months or years, they have time to increase their agency’s value. Audience members learn the keys to increasing agency value.
Agency Value: What you really need to know
Agency valuations are simple, right? Is it some number times agency commissions? Or is it some number times agency revenues or some number times agency profit? Or is it some number times EBITDA? Or is it some number you dream it to be?
The fact is none of these answers are the best, none should be used by themselves, and often times different methodologies result in very different results. If you are thinking of buying or selling an agency, you need to have at least a basic understanding of doing agency valuations the right way if financial success is your goal. Agency owners need to know which factors must be considered, why due diligence is critical, what deal structure is best, and why the price may have to vary depending on who the buyer is relative to the seller. In some situations, laws actually stipulate which valuation methodology must be used! Agency owners need to know why the balance sheet matters and how ALL the methods using a “multiple of” factor miss this key point. This presentation covers all these key points AND attendees will learn how to maximize the value of their agencies.
While not all agencies will consider clusters, understanding them is very important because they can present competitive pressure. And, for those that might consider a cluster or have joined a cluster, this class will cover the critical considerations, including a discussion about why most cluster contracts are nothing more than time bombs and how to improve them. Participants will also learn alternatives to joining a cluster.