Insurance Agency Merger & Acquisition Trends

Over the past several years, mergers and acquisitions have become a defining trend in the independent insurance industry. Given current market conditions, it's important for independent agents to understand what these trends mean for buying, selling, and having a well-defined perpetuation plan.

Private Equity's Role in the Market

Private equity firms continue to drive a significant portion of agency acquisitions. Their presence has reshaped the marketplace by offering speed, scale, and attractive terms. For agency owners who are nearing retirement and want a clean exit, private equity can be an appealing option, especially in a hard market where valuations remain strong.

However, selling to private equity typically brings more change than selling to a traditional independent buyer. Shifts in leadership, culture, operations, and retention strategies are common. If maintaining agency culture, client relationships, and staff continuity is important to you, it's critical to have a clearly defined perpetuation plan in place before considering a sale.

Internal Succession and Perpetuation Planning

The most effective way to preserve an agency's culture and long-term identity is through an internal perpetuation or succession plan. This means intentionally bringing in, developing, and mentoring the next generation of agency leadership well before the current owner plans to exit.

Younger producers and leaders often bring new prospecting strategies, adoption of technology, and fresh perspectives that strengthen the agency overall. When properly developed, they can step into ownership seamlessly, providing stability for clients, carriers, and employees.

Without an internal plan, agency owners are left seeking external buyers. While it is still largely a seller's market and agencies can sell quickly, the lack of preparation can limit control over outcomes such as culture, staff retention, and long-term vision.

Preparing for Strong Valuations

Owners considering a sale or who simply want to position their agency for the future, should understand what buyers, banks, and valuation firms are seeking. Profitability matters more than revenue alone.

Expect a close review of:

• EBITDA and cash flow.
• Quality and accuracy of financial statements.
• Book of business mix (lines, niches, and diversification).
• Operational efficiency and scalability.

Buyers want to know whether the agency is turnkey and capable of sustaining performance under new ownership. Strong systems, clean financials, and a stable team significantly increase valuation and deal confidence.

Whether you're planning to buy, sell, or transition ownership internally, preparation is key. Let us know if SFB's Insurance Agency Financing Team can help you in any way with your agency.

Kimberly Bunce, a relationship manager at SFB, is part of SFB's Insurance Agency Lending Team. During her tenure with SFB, Kimberly has been involved in numerous insurance agency transactions, including partner buyouts, partner buydowns, and agency refinancing.  Kimberly's experience as a CPA and her attention to detail helped these transactions run smoothly.