After years of robust M&A insurance activity, the number of deals completed in 2009 will probably cause this year's deal totals to be the lowest in several years: Reagan Consulting projects that approximately 170 deals will be completed in 2009–making it the lightest deal year in this decade. There are numerous reasons for this drop in activity, all of which have been well publicized and are well known. American Agent & Broker spoke to insurance M&A professionals Dale Myer and Richard Schlicher on who's buying, what these buyers are looking for and how an owner can determine the value of his or her agency.

AA&B: What is the current climate for M&A?

Dale Myer: In the robust years of 2006 to 2008, the M&A market was driven by the entrance of a large number of well-funded buyers anxious to become significant participants in the insurance distribution business. The trend was in full swing due to the perceived predictability and growth of future cash flows. Leverage was accessible, providing acquirers with high levels of relatively inexpensive capital. Despite the softening market, agency valuations continued to rise and buyers were willing to pay premium prices on ever-increasing valuation multiples. Today, many former acquirers and lenders have retrenched. They are more conservative and cautious as to assumptions for future growth and EBITDA (earnings before interest, taxes, depreciation and amortization) margins.