When the Glass-Steagall Act's repeal changed the laws allowing banks to get into the insurance business, we agreed to be acquired by the bank. That was my exit strategy. In spite of our close relationship, we thought it prudent to enter into a joint venture to have a trial period before consummating the merger — and we were able to identify and resolve many potential issues well in advance. After two years of a joint venture, we proceeded to be acquired by the bank.

We could not anticipate every issue that could come up during integration, and were confident that none could cause any serious damage — but two did come up. One resulted from a compliance/regulatory issue, ERISA, and the other from an IT vendor issue. Both impacted the earn-out.

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Potential regulatory violations

The bank's compliance officer felt there was a potential regulatory violation that could result in a heavy penalty. For years prior to the acquisition, the agency was the broker for the bank's and the agency's employee benefit plans: The agency was both a Life & Health general agency, and an NASD broker/dealer providing all investment products for our 401(k) plan. Less than two years into the earn-out, the compliance people convinced the bank that they were in violation of ERISA regulations that would prohibit a public company from handling its own benefits, welfare and retirement plans, and would have to divest all to a third party.

Related: The dreaded 'P' word: Perpetuation

This would have a negative effect on the earn-out payment as we stood to lose over $225,000 in commissions annually, and I fought to keep the revenue in the agency. To prolong the decision, I persuaded the bank's attorney and EVP/COO to contact ERISA lawyers in Washington, D.C., for their opinion. After three months, ERISA informed the bank that it could take two years for a determination, as this was a new law. The bank decided to avoid a potential penalty and moved all the plans to a third-party provider. The agency lost about 18 months of revenue from the benefits and 401(k) plan to the earn-out. (Incidentally, to the best of my knowledge, the ERISA lawyers have never responded to the bank's inquiry more than 12 years ago.)

Vendor issues

Additionally, after about a year into the earn-out, our agency IT vendor decided to mandate several updates to the agency management system, which would have cost the agency about $45,000. I asked the bank to share the cost with the agency, but they determined it was the agency's problem, not the bank's. Because I didn't want another hit to the earn-out, I managed to stall the upgrades to coincide with the end of the earn-out period. While the agency did end up paying for it, it was well after the three-year acquisition period was concluded and didn't impact my earn-out.

Related: Less than half of surveyed independent agents have a perpetuation plan for their businesses

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Integration team skills

Once you've made the decision to acquire or be acquired or to merge with another agency, broker or bank, you are the most knowledgeable person to manage your overall integration plan. After the due diligence has been completed, designate in-house staff or outside consultants (your project leaders) who can dedicate the time to manage the critical projects that are part of your plan.

In addition to understanding your business and your goals for the integration, they must have the skills to:

• Identify stakeholders. Who cares about the success or failure of your integration? These are your customers, principals, vendors, business partners, employees, and financial or regulatory institutions.
• Break the integration down into tasks or even sub-tasks, like reviewing agency and brokerage agreements, ordering new business cards, reviewing equipment or facility leases, or moving office equipment.
• Identify task dependencies and milestones. An example would be the review and possible revision of all agency contracts to reflect the new business entity to ensure correct licenses will be in place. This is also a major milestone, because you could not continue to do business as usual once the deal has been finalized.
• Figure out how long each task will take to accomplish, and make sure there is a person assigned to accomplish each task by the due date.
• Understand any resource constraints. Is there a budget for the integration? For each task? Is there enough staff to concurrently conduct business and accomplish integration tasks or do you need to hire up? Are the right people being assigned to specific tasks?
• Perform ongoing risk identification and analysis. What can possibly go wrong? Can a potential risk be eliminated, mitigated or even ignored?
• Create a plan for regular communications, including budget, overdue tasks, risks and threat. Does the left hand affect what the right hand is doing? Is everyone aware of tasks that have been assigned to them?
• Work these plans daily, and know when to escalate issues.

There are four components of the integration that are necessarily assigned to you and cannot be delegated to staff: your Critical Success Factors.

• Focus on the agency's mission to meet revenue goals
• Customer retention
• Employee satisfaction with benefits, management style, professional growth opportunities and/or constraints that come from working for a public company
• Maintain your corporate culture – you've been successful because of who you are.

Related: Thinking of selling your agency? Here's what to do