Private Equity Firms Buying Insurance Brokerages

Insurance brokerage has been one of the busiest areas of private equity investment for years. Agencies earn commissions that renew with each policy, clients rarely switch when service is good, and thousands of independent agencies are run by owners approaching retirement. Large consolidators backed by private equity buy agencies of every size, and new platforms keep forming.

Buyers look first at the book of business: commercial lines, personal lines and employee benefits, retention rates, how concentrated revenue is among the largest clients and carriers, and how fast the book grows on its own without acquisitions. Contingent and profit-sharing commissions are usually valued separately from core commissions, because they change from year to year.

Deals in this sector often combine cash at closing with an earnout paid over the following years if the agency reaches revenue targets. Buyers also pay close attention to producers. They will want to know who owns each relationship, whether producers have signed agreements not to take clients with them, and how producers will be paid after the sale. An agency where most revenue depends on one or two people near retirement will be valued with that in mind.

For an owner, the important questions are how much of the price is paid at closing, how the earnout is measured and what could reduce it, whether your agency keeps its name and carrier appointments, how your staff's pay and benefits will change, and whether you will be asked to roll equity into the platform. The profiles below show which firms own brokerage platforms and what they have bought recently.

Ask, too, how the buyer handles service after closing. Some platforms move every agency onto one management system and one service center; others leave each agency to run much as it did before. Your clients will notice the difference.

Greymont is paid by buyers, never by owners. Greymont can help you compare these platforms on what you would actually receive, how earnouts are measured and how your clients would be served.