Agents Must Separate M&A Fact From Fiction
Common misperceptions could steer agency principals down the wrong road
With a significant number of agencies selling for more than 2.0-times revenue, the typical agency's value now is around 2.0 times revenue.
False.
Given that acquirers base their pricing on a multiple of EBITDA rather than a multiple of revenue, the most effective way to maximize an agency's value is to maximize its profit margins.
False.
Banks have generally "overpaid" for agencies they have acquired and have frequently been disappointed by the results of their acquisitions.
False.
A bank will typically pay a premium for its first acquisition but then will reduce its pricing in the unlikely event that it needs to do any subsequent acquisitions.
False on two counts.
With so many agencies having sold over the past few years, buyers must be running out of agencies to acquire.
Definitely false!
www.reaganconsulting.com
Common misperceptions could steer agency principals down the wrong road
With a significant number of agencies selling for more than 2.0-times revenue, the typical agency's value now is around 2.0 times revenue.
False.
Given that acquirers base their pricing on a multiple of EBITDA rather than a multiple of revenue, the most effective way to maximize an agency's value is to maximize its profit margins.
False.
Banks have generally "overpaid" for agencies they have acquired and have frequently been disappointed by the results of their acquisitions.
False.
A bank will typically pay a premium for its first acquisition but then will reduce its pricing in the unlikely event that it needs to do any subsequent acquisitions.
False on two counts.
With so many agencies having sold over the past few years, buyers must be running out of agencies to acquire.
Definitely false!
www.reaganconsulting.com
Reproduced from National Underwriter Edition, July 22, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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