| Business Sale Generates Premium Price |
A client of ours who owns an insurance brokerage called IBCO (not its actual name), was approached by a large insurance company, BUYCO (not its actual name), with an intention to buy. Though our client had not been looking to sell prior to BUYCO's knock on the door, he was intrigued, and after a good deal of introspection, asked Berntson Porter to help him prepare for the possible sale.
Background on the Seller and Buyer:
IBCO operated in a narrow and lucrative brokerage niche selling specialized insurance products to a customer list of hundreds. It placed products from several insurance companies, including BUYCO's, with end users. IBCO sold in many states not served by BUYCO and also had a robust proprietary customer relationship management (CRM) software system.
BUYCO did not broker products, but saw the brokerage business as a potentially lucrative revenue channel. They believed an acquisition of IBCO would accomplish several strategic objectives, such as: - Increase insurance revenues. All sales of the specialized insurance product would flow entirely to BUYCO rather than be distributed among several insurance carriers.
- Earn broker profits. Vertical integration of the product and sales pipelines would enable BUYCO to better control the process and earn broker profits.
- Provide a platform for expansion. IBCO would become the platform company for BUYCO management to explore brokerage operations and expand into other regions of the US, especially if the owner of IBCO would work for BUYCO as part of the transaction.
- Obtain proprietary software. The robust CRM system would provide significant intangible value. BUYCO desires to integrate it nationwide.
- Gain immediate entry into several new states.
IBCO's owner enjoyed his work and had been looking for opportunities to expand his horizons. BUYCO's intention to buy was intriguing for a number of reasons. It would allow our client to obtain a lot of money now to fund his financial and estate plans, and he could eliminate the future risks of ownership due to adverse economic conditions. He was not in a position where he needed to sell, but did envision the potential for a mutually beneficial relationship. As a result of his personal evaluation he asked us to help him craft a transaction.
The services Berntson Porter provided included the preparation of compelling valuation analysis supported by financial and operating data to generate a premium strategic transaction value. Our Transition and Valuation Services, Tax Services and Assurance Services groups worked in concert with IBCO's highly competent attorney to advise on transaction structuring, tax efficiency, negotiation, and due diligence.
Result. Over the course of a few months the parties created a mutually beneficial deal. The seller received a premium price for the business and a lucrative executive contract. The buyer acquired a company with significant strategic value, as well as a new executive who will spearhead integration of brokerage services into BUYCO and throughout the country.
Wins all around.
Berntson Porter & Company Business Transition and Valuation Services group specializes in longer-term business owner transition planning and implementation, shorter-term merger & acquisition transaction advice, and business valuations for a variety of purposes. Please contact Allan Vander Hamm at 425-289-7613 or avanderhamm@bpcpa.com to learn more. |
