As we have pointed out in numerous National Underwriter articles over the years, internally perpetuated agency valuations typically lag those of third-party buyers by a wide margin. In other words, your agency's value to an external, third-party buyer is generally considerably higher than the value of the agency for internal stock transactions.
In 2007, the average agency in our "Reagan Value Index" (an index of 30 independent agencies we value for internal perpetuation purposes on an annual basis) was valued at 1.34-times-revenue.
A review of several recent agency transactions for which we represented the seller reveals an average sale price of 2.05-times-revenue–a difference of 53 percent over our average internal valuation.
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