Clearly defining a strategy is imperative in the process of an M&A. Begin your approach with a strategy that narrows your search of prospects:

1. First, decide what you want to acquire. Will the expansion allow you to take on new territory? Your business expansion options include property and casualty, life, retail, wholesale in personal or commercial lines. Which option will best fit your company's objectives?
2. It's all about location, location, location! Determine where you want to buy. Choosing a location within a set mile radius of the current business can help roll in operations, but you also contemplate a stand-alone branch in a neighboring community to create presence in a new rural or urban setting.
3. Consider facets including revenue size and confirmation of corporate structure of the seller (C-Corp, ESPOP versus others). Determine your target market by deciding whether to cater to diverse client mix or a heavily focused group of accounts. You could also decide to venture into new territory, offering a complimentary mix of businesses.
4. Contemplate the exit strategy for the seller and your perpetuation opportunity as a buyer. Finally, will the new firm have a single owner or producer or multiple?

No matter which options you choose, the development of this preliminary strategy will enable you to limit the energy and resources associated with M&A search, allowing you to focus only on the agencies that fit your targeted strategy.

2. Design an M&A Marketing and Communication Plan

Identify your prospects through carrier referrals, R&D of local competition and field personnel.

It can take time to find the right candidates or partners. But once you find the right match, determine who will execute your M&A plan establish your business as a marketable buyer. Build your “elevator” speech, create an explanation of why a prospect should sell to you and institute a time frame and mode of contact to follow-up with prospects consistently. Appeal to your prospects! You need to sell yourself as an attractive buyer.

A prepared speech and business plan requires research on the seller's ad hoc financial information, top carriers and product specialties; and producer information including contracts, restrictive covenants or book ownership.

3. Implementation

Once your prospects are identified, initiate meetings with them in order to develop a relationship. Build chemistry with your prospects, and get a feel for how they fit into your M&A matrix.

Stick to the communication plan, but continue to gather information and create a database of knowledge. You will want to be prepared for the moment the seller calls.

4. When the Seller Calls: Converting Prospects to Candidates/Partners

Once the seller initiates contact with you, execute non-disclosures or confidentiality agreements.

For the purpose of evaluating risk and value, request definitive information and prepare financial modeling of the potential acquisition. Base your model on the structural discussion and expectations of the seller and the financial capabilities of the buyer, and be prepared to present various growth and profitability scenarios to the seller.

After deciding on the terms and structure of the acquisition, prepare a letter of intent (LOI) or term sheet and begin final negotiations.

5. Due Diligence

As soon as the LOI/Term Sheet has been executed, determine the extent of due diligence to be performed on the seller, whether it is financial, operational, legal and tax-related or a combination.

6. Legal Documents & Closing

It's time to seal the deal! Use an attorney, who does not necessarily have to be existing counsel, and provide your attorney with an executed LOI/term sheet to initiate the drafting of a purchase agreement. Once the seller/producer employment contracts have been drafted, provide the seller with the documents for review or editing by the buyer or advisor.

The process of an M&A can be long and daunting, but effective planning can make it all the easier. In establishing a preliminary strategy and sticking to it, you can eliminate some of the stress, and hopefully emerge with an expansion that complements your current business, capable of meeting your needs.