How to Compete Within the Busy Market of Mergers and Acquisitions

July 22, 2021 Oak Street Funding

Compete in the M&A Market

Let’s face it. It can be intimidating for smaller agencies to think about competing against bigger investors who have deeper pockets and more resources at their disposal. The good news, though, is that winning doesn’t always have to boil down to who is able to make the highest bid.

Mergers and acquisitions are definitely a different animal than conventional organic growth avenues, and it pays to do your homework. It’s not as easy as simply targeting an insurance agency to acquire and signing on the dotted line. If you’re thinking about throwing your hat into the mergers and acquisitions ring anytime soon, here are a few helpful suggestions to keep in mind. 

First, familiarize yourself with what’s required to pull off a successful merger or acquisition, and if needed, don’t hesitate to consult with a qualified MA advisor or an attorney for guidance. 

Next, do some in-depth market analysis and take a good, hard look at any upcoming opportunities within your geographic region. Even if you’re not ready to move on them immediately, scan ahead to the next year or two and weigh the pros and cons of diving into the mergers and acquisitions market as a way to grow your business. A profitable merger or acquisition should dovetail nicely into your existing business plan and enhance it. It should never distract from, damage or take away from the business you’ve already worked hard to build. If you’ve got the resources, it might be worth making someone from your agency responsible for keeping an eye on the evolving landscape to watch out for potential prospects. 

Do your groundwork ahead of time so you can position yourself as the ideal buyer as soon as an opportunity presents itself, rather than scrambling at the last minute to cover your bases. Conduct research to determine precisely what your financing options are — and make sure you pre-qualify — before you ever start putting a bid together. 

Once you’ve found an agency you’re interested in acquiring, try to find out as much as you can about the seller’s needs. What is his or her true motivation for selling — retirement? A need for quick cash? Are there other ancillary factors at play, such as employee interests the seller wants to protect? Also, find out if the seller has any tax concerns, and what you might be able to do to alleviate them if necessary.

Determine what kind of legacy they want to continue. A seller who has worked hard to create a long-term presence within the community and built a strong reputation for doing things their own way may be swayed by a buyer who intends to preserve that culture and promote a sense of continuity, rather than someone with an entirely different agenda who plans to immediately change the name on the door as well as everything else about the business.

Once you’ve established that you do indeed want to purchase the insurance agency, move forward with your intentions quickly and confidently. In other words, strike while the iron is hot. Going in early with a fair opening bid may help to keep competition down to a minimum, and stave off a potential bidding war. If your bid is below the asking price, be prepared to provide and discuss the rationale behind your offer. Don’t get sidetracked by lesser problems, concerns or unnecessary drama.

For proper due diligence, focus on the seller’s material issues and create an urgent, but reasonable, timeline to keep the process moving along.  Think outside the box and decide early on just how flexible you’re willing to be with the deal structure. A certain degree of flex may make the difference between closing the deal and losing it. For instance, perhaps you’re willing to accept more or less seller financing to distinguish yourself from a higher bidder. Is the seller looking for more cash up front, or an annuity at higher rates than their current investments? Exploring earn-outs and clawbacks may put you in a better position to compete with institutional buyers who are offering stock in their organizations. These are all variables you might be able to work with and turn to your advantage. 

Last but not least, be willing to walk away if you can’t come to a consensus you’re comfortable with. Know your own bottom line, and don’t overextend yourself. As they say, timing is everything, and it’s better to take a loss now than down the road. Keep looking and keep the faith. The right target at the right price will come along when it’s meant to.

About the Author

As Director of Strategic Markets Underwriting, Brian Henson specializes in underwriting, arranging, and structuring large loan transactions, mergers and acquisitions. He has 12 years of commercial lending experience, primarily with Midwestern banks. Brian started his career underwriting a loan portfolio of middle-market and large corporate commercial borrowers. Prior to joining Oak Street Funding, he managed a $200 Million national real estate loan portfolio. Brian graduated from Purdue University with a bachelor’s degree in management and a minor in finance. He can be reached at

Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.

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