Years of experience

Art Seifert started a program company from scratch, then borrowed capital from a carrier to buy out his partners. He subsequently sold this business to US Risk Underwriters, and now runs the division as Lighthouse Underwriters and The Lighthouse Companies. "There's never a right or wrong time to do a deal,obCrLf but there will be many variables, including the seller's age and how much he or she wants to work in the future, he said. "No deal will ever end up looking like the way it was first presented,obCrLf he added.

David Jordan spoke from the insurer's perspective. As senior vice president and COO of Risk Specialists Companies (RSC), a surplus lines broker subsidiary of AIG that produces and underwrites business for AIG entities including Lexington Insurance Co., he knows what MGAs face in the transaction process.

Archie McIntyre has spent 20 years of his career at Meadowbrook, which started as a privately owned agency that evolved into a programs business. Today, acquisitions are a key part of its future. Meadowbrook has recently completed three transactions, acquiring program administrators with underwriting expertise including Century Surety, a $220 million deal.

Representing private equity, Chris Lalonde assured the audience that in spite of the economic crisis, deals are still getting done. "However, big deals are frozen because if you went to the investment bank for debt, they're not lending,obCrLf he said. Because of this, the time frame for securing debt for a deal has increased. Much of Century Capital's debt comes from traditional banks-another frozen source-but with the $700 billion government bailout in the wings, Lalonde believes these sources should be loosening up soon. Debt funds are also available as a more expensive alternative to traditional lending, but which should be considered in light of the deal's growth potential. Companies and large pension funds are also looking for good places to invest

The elements of attraction
Buyers and sellers are attracted to different yet similar qualities in a potential partner. Buyers primarily seek underwriting expertise, which is critical to carriers, followed by program profitability within the book of business, and a good cultural fit - essential when merging two or more entities, Kronenberg said.

The people involved in the deal are vitally important, especially if the principals will be staying with the business, Seifert added. "A poor cultural match is frequently why a deal doesn't work,obCrLf he said. It's also important to understand business processing from an IT standpoint and to be able to merge two different IT systems, he added.

Similarly, company buyers seek "intellectual capital of the entire organization, not just the principals,obCrLf Jordan said. Business sustainability, margin improvement and underwriting profit are also essential.

Private equity firms agree about the importance of the "peopleobCrLf component. "The management team is key because we don't go in and run the business for you,obCrLf Lalonde said. Century Capital is also attracted to businesses with a competitive market advantage, such as great technology, as well as a high-quality distribution system, underwriting expertise, and a stellar reputation within the industry.