Three years ago, independent insurance agent Steve Aronson faced a dilemma many an independent insurance agency owner must face, whether based inside or outside Massachusetts – The decision on how best to perpetuate their independent insurance agency.
“I turned 60 and I am a third-generation owner. The agency actually turns 100 years in 2019,” explains Mr. Aronson. “I realized a couple of things…A.—I wasn’t getting any younger, and B. —I needed to make a plan since none of my three kids were coming into the agency,” he says. “They all have great careers that they are excited about and are doing very well.”
Another important thing that he realized early on was that an internal sale was unviable. “I looked around and realized that both, fortunately, and unfortunately, we had grown to the size where an internal sale just wasn’t practical,” he adds. Thus, began Mr. Aronson’s journey to secure the future for his agency.
“I began the journey of considering who a great partner would be since I wasn’t looking to walk away,” continues Mr. Aronson. “I am too young to sell and retire. I knew I would be paid well whoever I sold to. So, my plan was to find a great acquirer that would let me enjoy working for the next 10 years, the last 10 years of my career. So, I focused on phrase ‘QOL, my and my team’s Quality Of Life.’ “
Ultimately, Mr. Aronson did end up selling his agency, entering into a partnership with Acrisure. While Acrisure has become one of the largest privately owned agencies (now owned 85% by partner agents and management and only 15% by private equity) in the country, it is relatively unknown in the New England area. Mr. Aronson admits he is a little bit frustrated with the company, in that it does not promote its brand more in this area.
“Acrisure has been so busy and so successful with all of their acquisitions, they haven’t focused on hiring a marketing firm to promote their brand,” he explains adding that the company has done more than 100 acquisitions in both 2017 and 2018 and more than 350 since 2013.”
As for his decision to sell to Acrisure, it was the ability to continue to run his agency “our way” as he always had, that was the deciding factor for him.[pullquote]“I continue to think like an owner because I am still an owner… That gets back to QOL. If you don’t want to be an owner anymore, then this isn’t the right model for you. But I’ve been my own boss for 44 years. Me working for somebody else … would not have been a happy ending.”[/pullquote]
“They didn’t require that I change my AMS 360 management system. They didn’t require that I change Boston Software as my rating platform. Their technology team actually gave me a new network and all new computers on their dime, which was spectacular,” he says. “I’ve now got an IT team of a dozen professionals, when before I had a really nice local guy, but … that was my choice.”
“When an agency joins Acrisure, they become an AP, or an agency partner, meaning that you took part of your deal in Acrisure stock,” he continues. “This essentially means that my senior team and I are owners of the parent: Acrisure LLC.”
“I continue to think like an owner because I am still an owner. So is my management team. And that is important for some people. That gets back to QOL. If you don’t want to be an owner anymore, then this isn’t the right model for you. But I’ve been my own boss for 44 years. Me working for somebody else … would not have been a happy ending.”
Still happy with his decision three years on, he contacted Agency Checklists to share some of his insights and tips with others who may be contemplating or beginning the same journey.
Things agents should contemplate before perpetuating their agency
The first year of my journey was thinking about what years one through five after the transaction were supposed to look like. I got help from my CPA in cleaning up my P&L.
But it was mostly me thinking about me and my family, both my work family and my home family, about QOL, about the quality of our life after the transaction, not just the dollars involved. Because the dollars are going to be there no matter who you do a transaction with.
I wanted my clients to be taken care of. I wanted my staff to continue to enjoy the work environment that we have created. I have got a great team, many of them with me for well over 20 years. And I didn’t want them suddenly answering to some new autocratic COO from someplace else, telling them how to do what we already do pretty darn well.
Decide on who is going to run the agency after you sell it
I think once you decide whether you want to continue to run the agency or whether you want to step back and let somebody else run it determines which checklist is first. If you want to let somebody else run it, your focus is: what do you want to do with the rest of your life?
If you want to continue to run it, it’s, then decide what you want to do with the rest of your life but continue to run the agency? At 60 years old, I was way too young to retire. So, for me, this was a natural progression and a natural, comfortable decision. For others, either at the same age, because of family decisions, or health, or maybe they are a bit older, they want to start cutting back immediately.
Maybe an acquisition where someone else comes in and simply swallows them up with a new brand, with a new website and a new phone system and a new method of doing business, will work for some folks. As a matter of fact, that would be a smart decision for some agency principals.
Selling your agency is different from running your agency
If you went skiing by yourself for the first time, you probably want a coach or a teacher, because that would be a nasty trip down the mountain. If you have never done insurance M&A, if you don’t know finance, if you don’t know accounting, if you don’t know what EBITDA means, then you clearly need a coach or a representative, a professional representative. Maybe your CPA can help?
Reach out to friends and colleagues who have been down this path
My first great meeting was with Charlie Brophy from HUB. We had a four-hour lunch one day. I have known Charlie for a long time, and he was so generous with his time. He had been through enough acquisitions that he was able to help me frame my thought process and get me ready to find a great partner-acquirer. He helped me realize quickly that I have been working for myself and my dad for 40 years; the likelihood of me successfully working for somebody else was pretty slim.
So, I set out on a journey to find an acquirer who would let me, and my great team continue to be successful doing, for the most part, what we do, how we do it. Ultimately, I met with six potential acquirers before deciding on Acrisure.
Whether you hire a business broker or not, you should have an advisor
Personally, I chose not to use a business broker. My oldest son is a private equity guy…he was a spectacular friend and advisor through the process…Having seen mergers and acquisitions that had worked in different industries and seeing those that hadn’t worked, he reinforced my thoughts that I needed to find an acquirer who would let me and my team continue to run Aronson Insurance pretty much as we have.
They [agents] need an advisor. That advisor could be a business broker who knows insurance agency M&A. It could be their accountant. It could be their attorney. It could be their son or daughter. But the person must know M&A, must know finance.
I was fortunate to have my son. I also had done eight acquisitions myself before the transaction, so I already understood the way that M&A is done in our industry, and that helped me too.
Final thoughts
Mr. Aronson cautions agents to really think about what they want to get out of the sale of their agency before they commit to the process. “For the 70-year old agency principal who is tired and wants to go to Florida, an Acrisure standalone agency is probably not the right home,” contends Mr. Aronson. “They probably need a local firm to come in and take over the management of their agency for them and fold them in. And there are folks who do that very well. Culture matters, even if you are going to retire”
As Mr. Aronson knows that there are many other agencies in Massachusetts dealing with this issue, he has shared this latest update on his experience with Selling His Insurance Agency on Agency Checklists, in order to help his fellow agents.
As a longtime subscriber of our site, he says he would be happy to have a cup of coffee with any agent interested in learning more about Acrisure, his experience with the sale of his agency or anything in between. To get in touch, please contact us here at Agency Checklists and we will send along Steve’s contact information.
You may also find our checklists entitled “Selling Your Massachusetts insurance agency” or “Why, When & How An Agent Should Use A Business Broker Helpful.“
