Insurance companies are in demand for buyers who qualify to purchase them. According to top-ranked Business Broker, Russell Cohen, Insurance companies look for other insurance companies to acquire, especially those who match the client base of their existing policy holders.
I interviewed Business Broker, Russell Cohen, Murphy Business Franchise Owner and Florida licensed business broker about his latest sales transaction which was for the sale of an insurance company called Florida First Insurance in the South Florida city of Pembroke Pines.
My first interview question: ” What is it like selling an insurance company and what makes purchasing this type of business unique?”
Russell explained, “Not just anyone can become the owner of an insurance company. The purchaser of an insurance company must have what is known as a 220 Insurance License.”
During our interview it was clear that this sales transaction was an acquisition buy from the owners of an existing insurance company called Finney Insurance.
When a company buys another insurance company what they are really buying is the “book of business” of the commissions to be earned by the renewal of the policies by the existing policy holders. In addition, the new buyer can market to these customers for the opportunity to sell more insurance products and to grow the commission they will earn from the policies sold.
In this purchase, the buyer figured out how to earn these additional commissions from the book of business while at the same time reducing expenses and overhead by closing the doors of Florida First Insurance Company offices in Pembroke Pines. The previous owner will continue to work for the new company over the next few years as part of the sales agreement.
It is beneficial to the new owners and the existing customers if there is an acquisition in which the current owner stays on to help with the transition and to add new business for the new company.
The business sold in a very reasonable amount of time- 120 days and according to Russell Cohen, these type of acquisition of competitor companies is the fastest pathway to growth for insurance companies. The growth happens faster when they take over the “Book of Business” of another company.
When policies are renewed by existing customers, the new company that has purchased the book of business receives these commissions. The new company becomes the agent of record for those policies.
The insurance business of this company was 65 percent commercial and 35 percent auto and homeowner insurance policies. In the commercial insurance category there is business liability insurance, general liability insurance and worker’s compensation policies.
When asked what made the insurance company sale a smooth one, business broker, Russell Cohen said, “This insurance company was in this location for six years. The transition and the sale were not restricted because the seller of the insurance company was on a month-to-month lease at the time of the sale. There were no lease entanglements or extra lease expenses to add to the expenses of this sale.”
Russell continued,” Another factor that contributed to successful sales transaction was that the buyer and seller were well matched. The buyer specialized in a niche catering to small corporate clients and small business owners. The seller and the buyer had a match they they were in sync with the kind of business they do and the kind of clients they serve making it easy to merge the corporate cultures.”
We learned that when you find similar, like agencies that want to merge, it helps for a smoother transaction that the parties have a good, clear understanding of how this business segment operates and becomes more profitable. The strategies and goals can match and be in sync.
Congrats to Florida First Insurance seller, Jonathan Rausch and buyer, John Finney of Finney Insurance. Both companies are members of the Independent Insurance Agents Association, Broward Chapter.
We wanted to know what other criteria or factor is important in a business sale and to that Russell shared,” The motivation of the owner as to why they want to sell the business is a big factor in each sale. For this sales transaction we were told that the owner wanted to make life easier and to reduce the daily stress of a 30-minute commute in South Florida traffic to get to the business as well as to reduce business pressure and responsibilities for health considerations. “
Additionally Russell told us that the business climate for selling businesses here in Florida is one of an active marketplace. He has sold 21+ businesses so far this year. He reflected on international business matters which effect the economies such a what as happening in England.
Russell concluded, “Florida does have more visitors and residents during the colder moths of the year and summer can often be a slower time for business transactions than other times. Summer can and usually is a time when people take vacations and travel so new deals happen less frequently. “
Russell Cohen, Owner/Broker of this Murphy Business in Davie, Florida shared, “One reason why I am so busy right now is because the deals that I listed 6 months or more ago are now closing. I am getting new listings and good quality business inventory is coming on the market.”
In case you are wondering what new businesses Russell has just listed, he listed a Smoke Shop which has tobacco, vapor, and paraphernalia products. It makes about $135K and it’s on the market for $369K.