In arranging acquisitions for our clients, we often find that agency principals are surprised to learn that the value of their agency is lower than they expected. Why are expectations sometimes out of line with market reality? Unfortunately, many agency principals simply never take the time to learn what creates value within their agency, especially from the point of view of potential buyers.
To address this problem, Harbor Capital Advisors created the Strategic Assessment Service, or SAS. Essentially SAS is a process for helping agency principals to understand and create value within their agency.
SAS provides the agency principal with a body of information that enables him/her to understand the important components of value, such as the drivers and key leverage points, agency strengths and weaknesses, external threats and competitive issues, marketplace opportunities and the process for creating value. SAS is conducted in six steps.
1. We start by having the agency complete the Strategic Assessment Questionnaire. This is a fast, inexpensive and non-threatening way for us to learn about the agency. We gain insight concerning any plans or programs underway, how the agency operates, its strengths and weaknesses and any unique characteristics or capabilities of the agency.
2. We then analyze this body of information and develop a Preliminary Findings Report for management. The report essentially highlights any issues or concerns, outlines priorities and develops a focus for interviews with key people within the agency.
3. Interviews with key people help us gain additional information and insight regarding existing strategies or plans, any problems, issues or concerns, any perceptions related to key aspects of the agency, as well as any recommendations that might exist.
4. We then analyze the findings from the interviews and, in combination with the previous information, develop our Draft Findings and Recommendations Report. This report outlines the agency's capabilities and presents the various opportunity options. The draft version is reviewed with management so that management has the opportunity to recommend any changes for inclusion in the final version. Once management is satisfied with the draft report, we prepare the Final Findings and Recommendations Report.
5. We then conduct a one- or two-day on-site planning session to focus on the opportunities and those response strategies and options most appropriate for the agency.
6. This planning session results in a Corporate Development Plan that defines specific strategies and plans, including specific implementation requirements.
With SAS, agency principals gain insights about the internal and external factors influencing agency value. They are able to understand the options available and can make decisions to act on specific initiatives to create value. In summary, SAS is a way for agencies to make an investment toward the future value of their agency. *
The authors
Paul J. Di Stefano, CPA, CPCU, is managing director, and G. Edward Kalbaugh, MBA, is director of management advisory services of Harbor Capital Advisors, Inc., an investment bank and consultant to the insurance industry. They can be reached by e-mail at: harborcapitaladvisors@banet.net or by phone at (800) 858-2732.
©COPYRIGHT: The Rough Notes Magazine, 1999