Selling an insurance broking business

We see a trend emerging of activity in the sale of privately owned insurance brokers. Why is this we ask?

Reasons insurance brokers want to sell

There are a number of reasons for increased activity in this market at the moment. Insurance brokers are finding that now is a good time to monetise their business and client lists – there are market consolidators hovering. Insurance brokers think to themselves this may not always be the case.

The most common reasons include no organic growth in the market coupled with substantially increased costs of doing business. The complexity and rate of change means many smaller brokers have to pay for outsourced compliance and file audits which eats into margins.

The directors of many insurance brokers are coming up for retirement. The next generation either do not have the money or enthusiasm to take over and run the business. Succession planning has not been a great success for many – that old adage it is difficult to find the right person holds true. For many a business sale is the only way forward and often the larger consolidators are very interested.

Many insurance broker sales take place with smaller brokerages where the plan is to amalgamate, then cash in on the book of business via a sale and retire. There will be tax considerations. Some insurance brokers feel that the generous 10% rate of capital gains tax on business asset disposal relief may not be available for ever.

Smaller insurance brokers represent a compelling business purchase, which in turn can create a good deal of interest from buyers. Bearing in mind the cost of due diligence and time cost, vetting potential buyers at an early stage to ensure they are serious and realistically able to take on an insurance brokerage as a going concern is also important.

Buyer likely to try and negotiate staged or deferred payment

Typical ways in which a buyer may look to reduce the final purchase price if deferred payment becomes part of the deal are:

  • the extent to which the seller will be locked into a future role in the business;
  • economic downturn; and/or
  • ways in which the buyer may try to manipulate deferred consideration based on profit levels.

If there is to be an earn out we are strong negotiators, know the trade off points to push and plug the gaps.

Regulatory issues when selling insurance brokerage

With a regulated business such as insurance, due diligence will be more detailed and expensive, especially with the common relationships insurance brokers have with self-employed representatives and agents and where there are commission and/or referral arrangements, again it might be harder to sell.

Specialist solicitors for selling insurance broker business

Our experience in the specific issues means we focus quickly and cost effectively on the key issues. This saves time and money. Whilst this page is focused on selling privately owned insurance brokers we do work with people looking to buy insurance related businesses as well.

We are always happy to talk over any questions you may have and provide an initial scope on how you can go about selling or buying insurance brokers. Please get in touch on 020 7438 1060.

John Deane

John solves commercial problems for SMEs and their investors. It is said that he is unbelievably practical and seasoned in finding the right solution without too much fuss. He has an established reputation in the technology, art and media industries.

Let us take it from here

Call us on 020 7438 1060 or complete the form and one of our team will be in touch.