Tips for executing acquisitions efficiently
By Bradley Flowers
When it comes to growth in the insurance industry, many small, independent agencies focus on organic strategies such as adding one customer at a time. However, there is another path to scaling that is often overlooked by younger or smaller firms: mergers and acquisitions (M&A). While acquisitions may seem like the domain of large corporations, they are becoming increasingly accessible and beneficial for agencies of all sizes.
Success leaves clues
Author and motivational speaker Tony Robbins famously said, “Success leaves clues. Go figure out what someone who was successful did. Model it. Improve it. Learn their steps.” This philosophy has guided my approach to agency acquisitions.
If you analyze the growth of top-tier agencies, you’ll notice one common factor: acquisitions. For example, one firm in particular catapulted into prominence within a few short years by aggressively acquiring smaller agencies in a smart way.
However, many of these big firms only grow by acquisition and osmosis, in other words, bringing on new clients simply by being so large. At Portal, our mindset is similar but slightly different. We are good at organic growth; if we can acquire like the big boys and grow organically at the same time, its a recipe for a successful agency.
The key is not to reinvent the wheel but to study what works, adapt it to your scale, and execute it efficiently.
The case for acquisitions
Acquisitions offer numerous advantages over organic growth alone. These include:
- Immediate scale. Acquiring another agency allows you to add its book of business, revenue, and client base to your portfolio instantly.
Start small, stay disciplined, and focus on long-term value creation. With the right approach, your agency can achieve exponential growth and become a regional powerhouse—all while maintaining the personal touch that sets independent agencies apart.
- Economies of scale. Many operational costs—such as management systems, accounting, and tech infrastructure—don’t scale at the same rate as revenue. By eliminating redundancies, acquisitions can significantly boost profitability.
- Enhanced talent pool. M&A often brings experienced producers and valuable staff members into your organization. In fact, we are in the middle of an acquisition right now of a prominent local agency, but I am more excited about the employees that we are adding to our team rather than the book of business itself.
- Competitive edge. Acquiring local competitors consolidates your market share and positions your agency as a regional leader.
Building an acquisition strategy
When Portal Insurance acquired its first agency, our valuation increased substantially almost overnight. This exponential growth occurred because the acquired agency’s expenses were mostly redundant with our own, meaning almost all of its revenue went straight to our bottom line.
Now that we have set the table, here are some actionable steps to replicate our process:
- Finding deals. This can be accomplished through:
- Carrier reps. Regularly ask carrier reps if they know of any agencies looking to sell. They often have insider knowledge and can provide leads. This can be a longer play strategy but it works. Your carrier reps know everyone and they know what’s going on in every agency.
- Networking. Building relationships with other agency owners is invaluable. Many of the best opportunities come from personal connections. In fact, the two largest acquisitions I have made have been from people with whom I have built working relationships.
- Platforms. Tools like Cake, Agency Equity, and business brokers offer listings of agencies for sale. While some listings may require digging, these platforms can yield hidden gems.
- Direct outreach. Consider running targeted ads aimed at agency owners in your state who may be considering selling. Your pitch should differentiate you from private equity buyers by emphasizing continuity and care for their employees.
- Compounding effort. Think about selling insurance in your agency: The larger your client base gets, the more referrals you get, and your efforts compound upon themself. Buying agencies is no different; once you have a few under your belt, you build a reputation, and sellers will reach out to you.
- Streamlining the process. Traditional M&A processes can be slow and cumbersome, often resulting in missed opportunities. At Portal, we’ve optimized the process:
- Conduct a quick valuation based on key metrics like revenue and expenses.
- Present a Letter of Intent (LOI) early to secure exclusivity.
- Perform detailed due diligence after the LOI.
- Close the deal efficiently.
This streamlined approach allows us to act quickly, locking in promising deals while ensuring thorough evaluation before finalizing.
- Valuing the opportunity. A simple valuation formula can guide your decision-making; figure out what EBITDA multiple you are comfortable paying. Using this baseline you can determine if something is in your wheelhouse or not. Mine is 5.5x EBITDA (I’m sure this will ebb and flow through my career and with the economy).
When I am looking at an agency, if they are higher than this figure and I still want to buy it, I know I will have to look for serious upside and/or get creative in my deal structure.
For example, an agency I recently spoke to had $163,000 in adjusted EBITDA and I could justify a purchase price of $896,500. The seller wanted $4 million. That one was a no-go. This back-of-the-napkin math is invaluable for evaluating whether a deal makes financial sense.
Be willing to walk away. One of the biggest mistakes
I’ve seen agency owners make is falling in love
with a deal. Always remember that acquisitions are investments.
Structuring the offer. Creative deal structures can make acquisitions more accessible:
- Upfront and earnout. Offer a portion upfront and tie additional payments to performance metrics like revenue growth or retention rates.
- Cash plus renewals. Provide a smaller upfront payment with ongoing commissions based on renewals. I like this strategy because it gives you a safety net and the seller has no ceiling; if rates go up they see the benefit of that. This is great for smaller agencies.
- Strategic partnerships. In some cases, offer backend support—such as technology and standard operating procedures (SOPs)—in exchange for a share of future profits. We have worked a few deals with sellers where instead of buying the agency, we become their partner but only for future growth, i.e., if we implement our processes, systems, tech and infrastructure (things most smaller agencies struggle with) and if we don’t grow the agency we don’t get squat. But if we do grow it, everyone wins. This reduces initial capital requirements while fostering collaboration.
Challenges and solutions
While acquisitions can transform your agency, they are not without challenges. Here’s how to address common obstacles:
Team integration. In my mind, there are two types of acquisitions: those that involve employees coming over to your agency and those that don’t. Transparent communication with the acquired team is critical. Set realistic expectations and provide support to ease the transition.
Cultural fit. Aligning the cultures of two organizations can be tricky. Hosting joint events, such as team-building activities, can help foster trust and camaraderie.
Financial due diligence. Ensure you verify financial records thoroughly. Ask for detailed profit-and-loss statements, balance sheets, and tax documents. A quick valuation isn’t enough; digging deeper can uncover hidden liabilities. Use experts who know the process inside and out. For example, we use Carey Wallace from Agency Focus as our second set of eyes on things.
Operational improvements. Look for “low-hanging fruit” in the acquired agency. Simple upgrades, like introducing an agency management system or providing better tools for employees, can drive significant productivity gains. It doesn’t have to be anything fancy or over complicated.
On one of our recent acquisitions, we noticed that every employee was working on a small laptop, no external monitor, no mouse, keyboard, etc. By simply giving everyone dual monitors and other proper equipment, that team wrote more insurance in 2024 than they ever had.
Key insights
Here are some key insights for small agencies to consider regarding acquisitions:
- Be willing to walk away. One of the biggest mistakes I’ve seen agency owners make is falling in love with a deal. Always remember that acquisitions are investments. Stick to your numbers and don’t be afraid to walk away if the deal doesn’t meet your criteria. When you don’t involve emotion, it’s easier to look at things objectively.
- Build strong relationships. Some of the best opportunities come from relationships, whether with carrier reps, other agency owners, or referral partners. Networking is not just a tool for growth; it’s a cornerstone of effective acquisitions.
- Stay disciplined. Speed is essential, but so is thoroughness. Quickly secure LOIs, but follow through with meticulous due diligence. This balance ensures you don’t lose deals while protecting your investment.
- Scale smart. Acquisitions are not reserved for large corporations. With the right strategy, even a small, young agency can leverage M&As to achieve extraordinary growth. By combining organic efforts with strategic acquisitions, you can build a resilient, scalable business while staying true to your core values.
Start small, stay disciplined, and focus on long-term value creation. With the right approach, your agency can achieve exponential growth and become a regional powerhouse—all while maintaining the personal touch that sets independent agencies apart.
The author
Bradley Flowers is the founder and CEO of Portal Insurance, and the co-host of The Insurance Guys Podcast. Bradley is a nationally recognized insurance agency owner and business enthusiast. He runs the day-to-day operations at Portal Insurance with locations in Mobile, Atlanta, and Gulf Shores, Alabama. He founded Portal from “less than scratch” in 2019 after eight years on the captive side. In 2019, Portal Insurance was named the “Agency for the Future’’ by Safeco Insurance. Bradley is married to Laurel and they have three beautiful kids, Kleighton, Luke and Cal. He can be reached at bradley@portalinsurance.com.
