By Rick Dennen, President and CEO, Oak Street Funding
If you apply the notion of a chain being only as strong as its weakest link to an insurance agency, companies embarking on mergers or acquisitions would be wise to invest time and money to uncover weak links before a sale is finalized. Although many agency owners start an M&A process focused on financials, overlooking or minimizing hidden vulnerabilities can be a costly mistake.
The need for buyers to carefully evaluate financials, preferably with the help of an accounting professional, is a given. A thorough review and analysis of budgets, commission statements, retention reports, audited financials and tax returns give buyers a good picture of an agency's financial viability. Buyers also must determine how much capital will be needed to continue agency operations during and after the acquisition.
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