When the fit is right, selling your agency to a bank can be the perfect option for the agent who wants access to capital and new customers to expand the business dramatically. It also makes sense for the agent who's looking toward retirement.
There generally are two types of agents who decide to sell their firm to banks:
o One type wants to retire immediately or almost immediately, and get the best sale price and highest financial security for their retirement.
o The other type is the exact opposite–rather than retiring, they want to take their careers to the next level and make more money. Selling to a bank gives them access to the bank's vast customer list and significant cross-selling opportunities.
It's a myth that bankers are looking to acquire big agencies. What they're looking for are high-quality operations and skilled management, regardless of size.
Bank acquisitions fall in two categories.
If the bank hasn't been in insurance before, it must acquire a platform agency. This is the most crucial acquisition, because it will be the foundation or infrastructure on which the bank's insurance business is built.
Once the bank has a platform agency, it looks for agencies in the second category–additional books of business that it can simply buy and bolt on to its platform agency.
If your agency is a potential platform agency, keep in mind that the bank will want to use it as a framework for additional acquisitions. Management will want you to be able to show your ability to help integrate and manage more acquisitions. Smart bank executives are looking for an agency management willing to continue on for an extended period to manage what they expect to be a key profit center for the bank.
One agent I know sold his agency to a bank a few years ago. Since then, the agency flourished and grew so fast that it has become the bank's largest profit center. The bank's top management and the board of directors are so pleased that they've undertaken a major expansion of the insurance business, with the agent leading the charge.
Now 46, he is the director of a key bank subsidiary and is being rewarded commensurately for his success.
Bankers look for agencies that are run the way a business is supposed to be run, with detailed financial, tax, production, personnel and marketing records. If you're serious about selling to a bank–or anyone else–whip your records into good shape before beginning negotiations.
For the agent, the acquisition means opportunities for cross-selling and other synergies. Every bank has customer information that's like gold to an insurance agent. By mining this information, agents can sell more insurance to bank customers than through cold-calling strangers. By combining forces, both the bank and the agent should come out ahead.
The bank will want to make sure the agency it is acquiring has the ability to effectively use the resources the bank will provide to convert bank customers into insurance and financial services clients. That requires a certain amount of sophistication and willingness to be a team player.
However, it's not a one-way street. As a seller–especially if you plan to stick around after the sale–you'll want to make sure the bank will provide the right environment.
Management should be supportive and help you work with key referral sources within the bank, but be cautious if the bankers seem as if they want to micromanage the insurance operation and tie you down in lots of meetings.
Selling your agency to a bank should provide opportunities for your entrepreneurial spirit to blossom, not stifle it. With the right partnership and clear expectations on both sides, it can be a highly profitable marriage.
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