September 30, 2023

This put up is a part of a collection sponsored by AgentSync.

Whereas the pandemic cooled off mergers and acquisitions exercise within the insurance coverage market, all indicators level to a sizzling M&A market within the subsequent 12 months. For those who’re within the place of evaluating (or being evaluated!) for an M&A match, don’t go away compliance controls out of the combination.

At AgentSync, we’re not attorneys or accountants, so we aren’t planning to handle the legalities or funds of insurance coverage M&A exercise in any depth. Nonetheless, we’re compliance junkies. And, to that finish, we’re right here to speak about the place license compliance matches in your insurance coverage M&A due diligence course of (and the quick reply is all over the place, it matches all over the place).

Priorities in M&A valuations

Most M&A due diligence lists have 10 to twenty key areas to research each for the needs of assessing a enterprise’s honest market worth and for figuring out a greatest match for an organizational merger. For the aim of brevity, we’re condensing these priorities into 5 buckets of values.

These are under no circumstances complete, however these broad classes might help gauge a large scope of points that in the end will every require a extra microscopic evaluation.


Essentially the most fundamental evaluation of a enterprise’s honest market worth goes to be primarily based on a number of completely different values. Now, there’s no straight reply for find out how to worth a enterprise – all calculations can solely get to date, as a result of the last word worth of a enterprise is no matter somebody is keen to pay.

Many companies promote primarily based off of a a number of of money movement or revenue – taking a 12 months’s value of commissions and different earnings, subtracting the price of operations and taxes and all, after which multiplying the leftover revenue to succeed in their “quantity.”

Additionally frequent is to make use of gross earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) to find out enterprise worth.

Nonetheless, all of those have limitations. What a enterprise did when it comes to gross sales this 12 months doesn’t imply the identical shall be true within the subsequent 12 months: Hopefully, this can be a lesson all of us realized within the pandemic!


Once we discuss product, we’re speaking about product-market match, the realities of provide and demand, mental property and possession, and even enterprise status.

Whether or not a enterprise has one thing value buying within the first place is a giant a part of the calculation when figuring out a enterprise’s worth or its intrinsic threat.

In fact, from a compliance perspective, if an insurance coverage product is being moved by those that aren’t correctly licensed, then even when it’s product you might be going through dangers together with your returns.


What controls are in place in your insurance coverage enterprise? Processes are the place we begin to get into the “gentle” items of evaluating a enterprise. However these gentle items of the enterprise are the place the rubber actually hits the highway, so to talk.

As an example, does a enterprise have a advertising and marketing funnel that can ship leads day after day? Are there strong channels in place to empower workers to behave like house owners, or is that this a enterprise engine that depends solely on management because the supply of inspiration and progress?

Relating to compliance, it’s vital to judge the processes for onboarding producers (whether or not unbiased or employees) and sustaining license compliance. As an example, is there a single one that holds all the required data of their head? Are there applied sciences that keep this? Is it a guide course of, riddled with errors?

A enterprise’s processes and procedures are essential to understanding whether or not an company or provider is a one-trick pony or a machine of progress.


Tradition-fit is king in M&As, and in case you are performing a risk-management evaluation, the way in which you assess tradition is within the folks. If a company has a whole lot of workers, then have they got a tradition that allows success? Do they embrace constructive adjustments? In case your goal has a smaller employees, then are all the best folks in the best locations? Is there an over-emphasis on management?

The standard folks pyramid could be a profitable mannequin, or it may be a decision-making bottleneck. Understanding which is at play for a given group is vital in assessing the folks and tradition.

Moreover, the place is the cultural emphasis on compliance? When assessing compliance, it may well assist to plug nationwide producer numbers (NPNs) for the contracted insurance coverage producers by NIPR and get a simple evaluation of knowledge, reminiscent of whether or not they’re up-to-date on related licenses and appointments, or whether or not they have reported motion towards them in varied states. Understanding whether or not your potential acquisition has a historical past of ignoring compliance could be key in assessing its worth, and in understanding how simply you’ll discover a tradition match.


Is a enterprise working at its peak? Perhaps you solely wish to purchase a streamlined ship that’s able to dart ahead. Perhaps you’re keen to put money into a fixer-upper. Regardless, understanding how a lot room for enchancment a possible acquisition has is vital in agreeing to a enterprise worth.

A part of a business’s potential is in its technology. Is it working with third-party distributors that add worth and effectivity? Are any tech companions truly a threat due to lax information privateness requirements? Perceive which tech options add worth and which dilute it.

Compliance and insurance coverage M&A

As we see insurance coverage trade consolidation, companies which might be buying and being acquired can have a protracted checklist of issues earlier than agreeing to any deal. And it’s completely honest that compliance is under no circumstances the only real issue by which to judge a enterprise deal.

Nonetheless, if you happen to’ll pardon a second of self-aggrandizement, we’ll put out an argument: Whether or not a provider, company, or MGA has been capable of keep compliance requirements is probably going metric to diagnose different underlying points.

Not often do compliance points come to gentle with out accompanying points. Enterprise entities or carriers with poor customer support, struggling inside cultures, or problematic development cycles typically had problem sustaining compliance hygiene lengthy earlier than different points grew to become public.

Conversely, if you happen to’re a enterprise trying to be acquired, what you are promoting valuation can solely be helped by demonstrating that you’ve an environment friendly workforce of producers who could be licensed, appointed, and ready-to-sell on the drop of a hat.

For those who’re on the lookout for a option to sustain in a heated surroundings of M&A actions, put compliance first, and get AgentSync Manage.

Mergers & Acquisitions