Indeed, the process is not the same for each buyer and seller of an agency, as each agencys personality is unique, points out Patricia A. Borowski, senior vice president with the National Association of Professional Insurance Agents, also based in Alexandria. “The biggest thing agents need to realize is that very few, if any, buy just a book of business. There is no such thing,” Ms. Borowski said.

The sale of an agency is more complex and the considerations extend beyond what makes the “best business profit-and-loss sense,” noted Ms. Borowski.

Agents must look closely at any merger or acquisition opportunity and ask some fundamental questions about the deal, Ms. Flannagan suggested, such as:

• What does this deal bring me?
• How does the other agency's business fit in with my financial planning?
• What do I want from this sale?
• Finally, why am I doing this?

Both IIAA and PIA offer a wealth of information and lists of experts who can help with the process. They say their state counterparts also offer support services. And getting expert help–both an accountant and agency valuator consultant, for example–is highly recommended, they add. However, when it comes back to the motivation behind the sale, a little planning and introspection is critical, they observed.

Ms. Flannagan advised that before bringing in experts to close and execute a deal, agents should do a little homework themselves, such as talking to clients of the prospective agency. Asking how long they have been with that agency and why they remain indicates what kind of relationship you are going to get into. Indicators of problems are a high rate of turnover within the agency or poor service of accounts in the past. Some customers might take their business elsewhere if they view the sale as another sign of instability.

The worst reason for an agency sale is making the deal the principal's retirement program, according to Ms. Borowski. Such an arrangement can put too much of a burden on the buyer if business does not keep up with the payment structure or the seller discovers there is not enough money in the deal to finance their retirement.

“Sellers have to be more attuned to the fact that they have to have a retirement program that is more realistic on return,” advised Ms. Borowski, adding they need to plan early and have an independent retirement plan.

One element agents might never factor into the deal as they go forward is their emotional investment. They become excited over the prospect of making the transaction and forget all the things they need to do to protect their business interests.

“The most important thing is to keep emotion out of it,” observed Carol A. Hammes, president of Middleton Group, a consulting firm based in Pine, Colo., and La Grange, Ill.

As a consultant, there are a lot of factors that need to be looked at, she said. To help agents understand what they are getting into and if they should be doing the deal, her firm supplies a checklist of 30 items that deal-makers need to review before her firm comes in. In some cases, Ms. Hammes said, agents changed their minds about selling after the review.

The make-or-break issue in any agency M&A deal is chemistry, experts agree. Work ethic, business philosophy, technology sophistication–any cultural or operational issue that is not closely examined can eventually undermine the deal's ultimate success.

“If the fit is not fundamentally good, it should never happen,” advised Tim Cunningham, a partner in OPTIS Partners, LLC, a financial and management consulting firm based in Chicago. “Too often the deals later get mucked-up because the organizations were not a good cultural fit.”

Among some of the potential pitfalls noted by consultants:

The level of training of customer service representatives, and what is expected of them.

What the sales goals are.

Who will stay in the agency once the deal is completed.

The new agencys name.

Mr. Cunningham advised that when it comes to these issues, it is best to get the “deal breakers” identified and out of the way early to ensure the process can continue. Waiting until the last minute can kill a deal or ruin its outcome down the road.

A “chemistry meeting” before the process begins is always warranted, which Ms. Hammes said her firm insists upon before going forward. What each party can and cannot live with, how they run their agencies, and what they expect from one another need to be ironed out early, she said.

“It is very important not to gloss over things about how different the agencies are,” Ms. Hammes said. “If some producer has shark teeth [in their sales approach], and the other is referral-based and is not used to that environment, when they come in, they will fall apart.”

The agencies should also plan to actively integrate their operations, Mr. Cunningham said, advising agents to get the tough issues out of the way in the first two-to-three weeks. Many acquisitions that fail might look sound on paper, but because of poor integration, they create nothing but headaches and heartache for everyone, he added.

“A bad deal on any level can destroy your [agency],” Mr. Cunningham warned.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 1, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.