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Building Equity Value

Buyer meets seller

The informational, emotional connections in the first meeting are crucial

By Phil Trem and Bill Baker

This article is part one of a two-part series about the first meeting between a buyer and a seller in a contemplated insurance agency acquisition. This article focuses on the buyer's perspective of the meeting. Part two of this series will provide a view from the seller's vantage point.

It is no secret that many mergers and acquisitions are occurring within the insurance distribution industry. While the number of transactions that occur on an annual basis is cyclical in nature, the reality is that agency consolidation began a number of years ago and will continue for many years to come.

As each deal is completed, the landscape of the typical buyer continues to develop. The buyer field, consisting of public brokers, bank-owned agencies, independent agencies (local, regional, and nationally based), and private equity funded organizations continues to become more intelligent. Buyers' strategies and negotiating tactics are constantly being refined and improved. The competition to acquire a high-performing seller is becoming more and more aggressive.

Buyers are utilizing different tactics to attract prospective sellers. Some of these efforts work; others do not. The most important factor for all buyers, however, is to ensure that when they get the opportunity to meet with the target agency's ownership, they make the most of the opportunity.

Relationship development

In 2005, actor Will Smith starred in a romantic comedy film call "Hitch." The premise of the movie is based around Will Smith's character, a professional matchmaker. He is hired by men to create an opportunity for a relationship to arise with a woman that under normal circumstances most likely would not occur. The basic principle used in the movie is that "no matter what, no matter when, no matter who…any man has a chance" with any woman. The plot is obviously a little far-fetched, but the premise, when put into the context of cultivating a business relationship, becomes very interesting.

From beginning to end, business relationships are typically both complex and dynamic. Broken down to its most basic elements, a business relationship is based upon an emotional or other connection between two or more people. This connection can be personal, professional or a mixture of both. It can be short-lived or cultivated over a long period of time.

For a buyer in a contemplated M&A transaction, this relationship begins during the first meeting with the target agency. Being properly prepared for this meeting in a variety of different ways can help you—like the characters in "Hitch"—create an opportunity for a relationship to arise.

Be in attract mode

When preparing for your first meeting, you (the buyer) need to be in attract mode. The first meeting should be focused solely on making the potential seller very interested in pursuing the relationship with both you and the organization you are representing. Your job in this meeting is to sell not only your organization, but you as an individual as well. If the seller can relate to you and feel comfortable with you, they will likely attribute the connection developing with you directly to your organization.

While you inevitably will be evaluating the seller during your conversations, do not let any aspect of the interaction distract you from your ultimate goal—attracting the prospect. If you are not impressed with the target agency at the end of the meeting, you can choose to not move forward in the process. If the seller is not impressed by you or your firm, you will have no power to decide how the relationship progresses.

Know your audience

It is essential in this first encounter that you understand whom you are going to be meeting. Understanding roles and responsibilities, as well as relationships to other employees, is going to give you insight into the perspectives of those you are meeting. If you understand where they are coming from, you can help paint them a picture of where they could be headed.

Remember the person you are meeting is probably an owner, but also most likely the CEO or other senior executive within the organization. While these individuals may be responsible for the management of a smaller firm than yours, they are still used to being in charge and have not administratively reported to anyone for some time.

A major concern of many sellers is the transition to not being at the top of the organizational chart. The seller needs to believe they will have a voice in the decisions affecting their organization and play a pivotal role in the future success of the larger firm. The relationship that develops between the current ownership and the individual they will report to is extremely important. If, in your first meeting, you speak to them as if they are an "employee," they will probably never be one of your employees.

The past, the present, and the future

As the conversation evolves, be prepared to walk the prospect through the life cycle of your organization. Explain the history of the organization from your vantage point. Giving insight into the creation of the organization and its roots can help the target draw parallels to their own path.

Describe the current landscape of the organization as well. Provide examples of how the company is structured, how sales interacts with service, and how different regions interact with one another. Walk them through how your business operates on a daily basis, your philosophy as it relates to account management, sales expectations, your specific management style contrasted to the style of the entire organization, and any relevant operation systems.

 Another key component of this conversation is helping them understand how they can help you achieve your organization's future goals. Being a part of the future plans is important. Whether the seller's key people will function as producers or in a management role, your articulating how these individuals can contribute to accomplishing the goals of your organization will help them visualize life after the deal. 

Life and career after the deal

As you are closing the meeting, be sure to explain to the seller how being a part of your organization will allow them to sell more business, keep more business, and/or have a better lifestyle. Your goal should be to show how all three are within reach.

This is crucial to closing any potential acquisition. How will the seller, by being a part of your organization, be able to offer to their existing clients any programs, services or markets that they do not currently have? Be prepared to walk the person through why your clients choose you over your competition. If you can't express your value proposition in a concise, five-minute conversation, then how can you expect the seller to understand why they should become a part of your organization? If you are able to do this, it becomes apparent to the seller that their clients will benefit from becoming part of your company. If you accomplish this task, then you are well on your way to making the deal happen.

Last, be prepared to discuss with the seller how they personally will achieve better results by becoming a part of your organization. Discuss with them what they are looking for for themselves and then stress how your organization can be the solution to those desires. By discussing these desires, you will not only understand what life will be like for both of you after the transaction, but also attract the seller on an emotional basis.

As Will Smith's character in "Hitch" said, "One dance, one look, one kiss, that's all we get. Just 'one shot' to make the difference between 'happily ever after' and 'oh, he's just some guy I went to something with once.'"

Take the time to prepare yourself before you go into your first meeting with a seller and you will ensure that you are not viewed as just "some guy."  

The authors

Phil Trem is vice president of Marsh, Berry & Company. He can be reached at or (440) 392-6547. Bill Baker is senior vice president of Marsh, Berry & Company. He can be reached at or (214) 717-6281.


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