Historical trends show that agency and brokerage mergers and acquisitions are on the rise. Asidefrom a slight dip in 2009 and 2010, rates of M&As have beenincreasing since 2000, with 291 transactions announced in 2012alone.

As a buyer, many considerations affect a business expansion, butthe process does not have to be overwhelming. For thosecontemplating or currently partaking in an M&A, Tim Cunningham at OPTIS Partnersoffers six steps that can help streamline the process,allowing your next merger and acquisition to run with ease.

1. Develop a Merger & Acquisitions “StrategyMix”

Clearly defining a strategy is imperative in the process of anM&A. Begin your approach with a strategy that narrows yoursearch of prospects:

1. First, decide what you want to acquire. Will the expansionallow you to take on new territory? Your business expansion optionsinclude property and casualty, life, retail, wholesale in personalor commercial lines. Which option will best fit your company'sobjectives?
2. It's all about location, location, location! Determine whereyou want to buy. Choosing a location within a set mile radius ofthe current business can help roll in operations, but you alsocontemplate a stand-alone branch in a neighboring community tocreate presence in a new rural or urban setting.
3. Consider facets including revenue size and confirmation ofcorporate structure of the seller (C-Corp, ESPOP versus others).Determine your target market by deciding whether to cater todiverse client mix or a heavily focused group of accounts. Youcould also decide to venture into new territory, offering acomplimentary mix of businesses.
4. Contemplate the exit strategy for the seller and yourperpetuation opportunity as a buyer. Finally, will the new firmhave a single owner or producer or multiple?

No matter which options you choose, the development of thispreliminary strategy will enable you to limit the energy andresources associated with M&A search, allowing you to focusonly on the agencies that fit your targeted strategy.

2. Design an M&A Marketing and CommunicationPlan

Identify your prospects through carrier referrals, R&D oflocal competition and field personnel.

It can take time to find the right candidates or partners. Butonce you find the right match, determine who will execute yourM&A plan establish your business as a marketable buyer. Buildyour “elevator” speech, create an explanation of why a prospectshould sell to you and institute a time frame and mode of contactto follow-up with prospects consistently. Appeal to your prospects!You need to sell yourself as an attractive buyer.

A prepared speech and business plan requires research on theseller's ad hoc financial information, top carriers and productspecialties; and producer information including contracts,restrictive covenants or book ownership.

3. Implementation

Once your prospects are identified, initiate meetings with themin order to develop a relationship. Build chemistry with yourprospects, and get a feel for how they fit into your M&Amatrix.

Stick to the communication plan, but continue to gatherinformation and create a database of knowledge. You will want to beprepared for the moment the seller calls.

4. When the Seller Calls: Converting Prospects toCandidates/Partners

Once the seller initiates contact with you, executenon-disclosures or confidentiality agreements.

For the purpose of evaluating risk and value, request definitiveinformation and prepare financial modeling of the potentialacquisition. Base your model on the structural discussion andexpectations of the seller and the financial capabilities of thebuyer, and be prepared to present various growth and profitabilityscenarios to the seller.

After deciding on the terms and structure of the acquisition,prepare a letter of intent (LOI) or term sheet and begin finalnegotiations.

5. Due Diligence

As soon as the LOI/Term Sheet has been executed, determine theextent of due diligence to be performed on the seller, whether itis financial, operational, legal and tax-related or a combination.

6. Legal Documents & Closing

It's time to seal the deal! Use an attorney, who does notnecessarily have to be existing counsel, and provide your attorneywith an executed LOI/term sheet to initiate the drafting of apurchase agreement. Once the seller/producer employment contractshave been drafted, provide the seller with the documents for reviewor editing by the buyer or advisor.

The process of an M&A can be long and daunting, buteffective planning can make it all the easier. In establishing apreliminary strategy and sticking to it, you can eliminate some ofthe stress, and hopefully emerge with an expansion that complementsyour current business, capable of meeting your needs.