Is Now a Good Time for You to Buy? For the small to medium sized agency, this is still an excellent time to buy, for the following reasons:

1. page ONE
Deal Activity
page TWO
Most Active
Buyers
page THREE
Is Now A Good
Time For You
To Buy?
June 2016
www.iroquoisgroup.com
Agency Acquisitions & Sales - Update
2015 was an amazingly active year for agency acquisitions & sales and 2016 looks like
it’s going to be a highly active year as well. In this article we will discuss what is occurring
and why, so you can better assess if this is a good time for you to purchase an agency or
monetize the value of your own.
Deal Activity
The industry measures how active the acquisition and sales environment is by keeping
track of the number of published buy/sell transactions that occur. They glean this information
from newspapers, industry periodicals and electronic media. Although many acquisitions go
unpublished, published transactions are generally considered the best indicator of what is
happening in acquisition activity.
As the table below indicates, 2015 was a record year in deal activity.
Of the deals shown on the preceding table, 309 were US deals in 2015 as compared to 254 in
2014. That represents a 22% rise in US deal activity for 2015
Announced and Reported M&A Transactions
US and Canada 2008 - 2015
Source - OPTIS Partners
500
450
400
350
300
250
200
150
100
50
0
2008 2009 2010 2011 2012 2013 2014 2015
297
184 204
289
321
268
357
451

2. page TWO
www.iroquoisgroup.com
Most Active Buyers
The table below shows the most active buyers and how many deals each completed in 2015.
Reasons for Selling
Every seller was different but frequently mentioned as reasons for selling were:
• Aging of owners and staff (the average owner’s age is pushing 60);
• Failed past attempts to perpetuate internally;
• Little or no growth;
• Softening rates for commercial lines;
• Increasing competition in personal lines;
• Uncertainty about the future (regulation, the Affordable Care Act (Obama Care), the sluggish economy and
what the future may hold for small business after the upcoming national elections);
• Difficulty attracting and retaining talent;
• The rising cost of talent;
• Increased awareness that agency values have risen with increased buyer demand.
Reasons for Buying
Many factors are driving the buyers’ activity.
• The low cost of money made available to banks from the federal government makes banks and niche lenders
very willing to lend;
• Unusually low interest rates and attractive lending terms make the cost of commercial financing attractive
to buyers;
• Agents and brokers are finding that the softening market is making organic growth a struggle so seek
acquisitions to keep their revenue growing at a healthy pace;
• Public brokers have high price-earnings ratios due to the inflated stock market so they can pay high multiples
of pro forma EBITDA and not dilute their earnings;
• Equity backed buyers view the stock market as volatile and feel that investing their excess capital in agency
acquisitions will give them a more predictable and less volatile return.
HUB International 37
Assured Partners 31
Arthur J. Gallagher 26
Confie Seguros 15
Brown & Brown 13
Most Active Buyers 2015 Transactions

3. The
IROQUOIS Group
®
page THREE
www.iroquoisgroup.com
Is Now a Good Time for You to Buy?
For the small to medium sized agency, this is still an excellent time to buy, for the following reasons:
• Willingness of commercial lenders to finance major portions of a purchase price and willingness of typical
sellers to finance most of the balance, means attractive deals for sellers can be accomplished with as little
as 10% of the buyer’s money needed up front towards the down payment, for example –
• Low interest rate loans help ease cash flow for the buyer;
• Many sellers want to work for a buyer after the sale, but have no interest in selling to a large broker or bank
where they may be treated like a number;
• The average deal price for asset purchases in 2015 was around 7 times pro forma EBITDA; assuming most
sellers have a pro forma EBITDA margin of about 25% of revenue, that means 2 things -
o Agencies can still be purchased for 1.75 times revenue (25% times 7 = 1.75 X sustainable revenue);
o If an agency can be purchased for 7 years of future profit (EBITDA), that is an excellent return on
investment and worth the effort to make it happen.
Editor’s Note: Iroquois has a wealth of resources available to members interested in growing through acquisitions
or perpetuating through merger or sale. Please talk to your Iroquois Regional Manager for more details.
Hypothetical Deal
Seller’s Revenues $250,000
Purchase Price @ 1.75 x Revenue $437,500
Source of Buyer’s Funds for Purchase
40% of Purchase Price = Loan from Commercial Lender $175,000
10% of Purchase Price (towards down payment) Comes From Buyer $43,750
Balance of Purchase Price is Note to Seller $218,750
Deal Structure
Total Down Payment $218,750
Balance Paid by Seller via 84 Month Promissory Note to Seller $218,750
Total Principle Seller Receives* $437,500
*note - seller also receives interest on the note from buyer