Perpetuation lessons learned

Bolton keeps identity as owners make quick moves to perpetuate

By Dennis H. Pillsbury

Bill Bolton (left) and Jim Bolton (right) continue to serve on the board of Bolton & Co. after selling their interests to younger partners in the agency.
This is, in some ways, a tale of three agencies that became one—as one merger led to a failed perpetuation—which led to an acquisition—which led to a successful perpetuation. And along the way, some hard lessons were learned.

The agency that remains is Bolton & Co., Pasadena, California, thanks to a successful perpetuation that involved prior planning and some generosity on the part of Bill and Jim Bolton. (Bolton & Co. was the Rough Notes Marketing Agency of the Month in June of 1999.)

Bolton & Co. was founded in 1931 by Dorance Bolton as a small agency in downtown Los Angeles. Several years later, in 1937, Ron Wanglin’s father started a one-man agency in Westwood. Ron joined his dad in 1977 and bought him out in 1979. “When I took over the agency, it was just my dad and his assistant.”

Earlier, in the 1960s, Dorance was joined by his sons, Jim, and later Bill, who spent a couple of years at Industrial Indemnity before joining the agency. Jim and Bill were very interested in growth and began turning the agency from a small family-owned business to a sizable operation with significant employee participation in ownership. The agency had an ESOP that owned around 35% of its stock.

Meanwhile, Russell, Gleason & Van Rooy (RGV) in Glendale was growing as fast as Bolton & Co. under the leadership of Bill Van Rooy and Tom O’Loughlin. It too had an ESOP that owned approximately 35% of its stock.

Ron Wanglin also was working hard to grow and went through a series of mergers when he saw an opportunity to merge with RGV just as Bill Van Rooy and Tom O’Loughlin were approaching retirement age. “I found this opportunity through industry contacts and merged with them in 1990.” That was the same year that Steve Brockmeyer, who was to become Ron’s partner, left Wausau to join Bolton & Co.

Back to RGV where Bill and Tom were getting set to retire and wanted to sell their 65% ownership to Ron and four other young people in the agency. “Unfortunately, they waited too long,” Ron says. “Only one of the five individuals had capital so it would have to be a leveraged buy-out. As we investigated the possibilities we determined that the balance sheet could not withstand such a buy-out.”

And so it was that RGV merged with Bolton. It turned out to be a good fit. “There were some nice synergies,” Ron notes. “RGV had a good bonding department and Bolton had built up a strong benefits department. The ESOPs were about the same size.” The merger was completed in April of 1994.

Soon after the merger, Tom O’Loughlin retired and his stock was purchased partly by the Boltons and select individual stockholders, including Ron, and partly by the ESOP. Four years later, Bill Van Rooy did the same.

“Bill and Jim Bolton started looking at their own situation,” Ron says. “At that point, they owned about 50% of the agency, with minority shareholders having around 15% and the balance in the ESOP.

“Bill and Jim had a great deal of pride in what they had accomplished and wanted the Bolton name to remain on the door. They realized that they needed a perpetuation plan in order to accomplish this. By now, Steve (Brockmeyer) and I had risen to the top of the list of possible successors and had support from others in the agency.”

Bill and Jim started building a succession plan with Ron, Steve and the other people in the agency. They brought in Bobby Reagan to look at the role of the ESOP in a buy-out and also talked to Assurex Global about helping out.

As a backdrop to this, “Bill and Jim were watching agencies get a lot of money from banks and other acquirers,” Ron says. However, they remained committed to the goal of internal perpetuation, despite the allure of significant monetary gain that could be made if they sold to external buyers.

The deal to perpetuate the agency was signed in April of 2003.

The Boltons accepted paper in payment. Assurex Development Corp. financed half of the transaction, issuing a seven-year note and the Bolton half involved a ten-year note. Ron got 15% ownership and Steve got 13.5% and a number of others became minority shareholders outside the ESOP. The ESOP grew to 65% ownership for tax-favored reasons.

Ron Wanglin, CIC, Chairman and co-CEO of Bolton & Co.

  

Steve Brockmeyer, ARM, CIC, President and co-CEO of Bolton & Co.

Ron Wanglin, CIC, became chairman and co-CEO and Steve Brockmeyer, ARM, CIC, was named president and co-CEO. They also have the largest books of business in the agency. Bill and Jim Bolton sit on the board and, while they continue to provide suggestions, “they have been very good about allowing us to grow and evolve the agency,” Ron points out. “We’ve maintained their philosophy of putting the client first and always doing the right thing for both the client and our insurance companies. The high ethical standards that were the hallmark of the Boltons remain a lynchpin for all people at the agency.

“We’ve also enhanced the dynamic growth that Jim and Bill started,” Ron continues. “When Jim joined the agency in 1964, our sales volume was $500,000. Bill joined him in 1967 and together, they built a regional powerhouse that boasts volume in excess of $200 million today.”

Ron adds that the principal change that the new management team has put into place has been a focus on even more aggressive programs, including a program for private schools, marketing relationships with a community bank, and being named the endorsed broker along with Woodruff Sawyer for The Employers Group under which they provide human resources services and other services to businesses in the group.

“The executive team really runs the agency,” Ron adds. “Mike Morey, CIC, our chief operating officer; Julie Bowman, CPA, our chief financial officer; and Joyce Elzouki, CPCU, CIC, our director of insurance operations, are the people who help us manage the operational aspects of the agency. We’re the vision guys. They make certain that everything runs smoothly so the vision can be implemented smoothly and effectively.”

The agency encourages its people to become involved in the industry and the community. Ron serves on the Assurex Global board and is a past president of the Big “I” of Santa Monica. Steve is on the CIAB board and is a past chairman of the IBA West Service Corp. Ron’s community service includes serving as chairman of the board of trustees for The Buckley School since 1994, as past chairman of the American Red Cross (West District), and as past president of the Westwood Village Rotary Club, as well as being named Rotarian of the Year in 1990.

“We’re also strong proponents of education and support our employees in their efforts to receive the CIC, ARM and CPCU designations,” Ron says.

The key ingredients for the successful perpetuation, according to Ron, were prior planning, molding of the individuals who would take over, the reducing of leverage by the owners, and a desire by the owners for their legacy to remain. Today, the agency is well positioned for smooth transitions in ownership and leadership. *