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Leaders Edge Q&A: Give us an overview of some important M&A trends going into 2024

Leaders Edge Q&A: Give us an overview of some important M&A trends going into 2024 2560 1708

Vantage Insurance Partners founder and CEO Alex Panlilio talks to Leader’s Edge about some of the important mergers and acquisitions trends for 2024.

Leaders Edge Q&A: Give us an overview of some important M&A trends going into 2024.

2023 saw fewer deals compared to previous years as a lot of very active buyers were surprised by the sudden interest rate spike at the end of 2022. Many of the traditional buyers are further prioritizing operational efficiencies and cost synergies to improve margins as a mitigant against their increased cost of capital for acquisitions.

Leaders Edge Q&A: Private equity backed insurance agencies have been very active in the M&A space in recent years. How do you see them navigating this current economic environment?

PE-backed agencies are typically more acquisitive than their non-PE-backed counterparts, with complex yet optimized capital structures and institutionalized controls in place. Despite challenges, there’s still a mandate to keep growing, so their acquisition activity will ramp back up in 2024 with a renewed confidence, balanced with cautious optimism.

Leaders Edge Q&A: For the acquirers that pitch autonomy, and no post-merger operational integration, can you still achieve cross-organizational effectiveness?

I believe buyers need to have a clear and distinct messaging around the level of autonomy after a sale. Operating as one firm becomes unwieldy and the ability to scale becomes a challenge. So, there’s a crucial need for some level of integration and centralization, especially for financial controls and consolidated data around your book of business.

Leaders Edge Q&A: What advice would you give to sellers or agency owners who are looking to sell in the near term? How can they position themselves to make sure they achieve the highest valuation possible?

My advice to optimize your firm’s valuation is to start by proactively recognizing your identity, culture and goals and then seek partners aligned with these aspects. The initial assessment should prioritize these factors over cash flow or EBITDA, as financial aspects will optimize themselves when sellers don’t make valuation the leading point in their approach to finding a partner.

Leaders Edge Q&A: What headway has Vantage made in the M&A space recently?

We have been very active in finding high-quality platform partners as well as many subacq partners under our platforms. Our platform partners stay economically aligned as we buy a majority stake in their firm, while they maintain a personally meaningful (direct) minority stake. Partnering with us enables our platform partners to become more acquisitive as we become their M&A arm—we build their subacq pipeline, conduct due diligence, structure, finance and integrate the deal.

Leaders Edge Q&A: What headway has Vantage made in the M&A space recently?

While our primary focus is on acquisitions, we prioritize a balanced approach between organic and inorganic growth for our partners by providing operational and organic initiatives to supplement their efforts. Our platform partners continue to maintain significantly high organic growth rates, well above industry average. This success stems from our partners’ strong economic alignment with us and their control over their businesses, ensuring continued growth in a sustainable fashion.

Learn more about the Vantage model

Flexible Perpetuation & Meaningful Equity Retention

Flexible Perpetuation & Meaningful Equity Retention 2560 1709

A Better Alternative for Smaller Agencies: Flexible Perpetuation & Meaningful Equity Retention

The world of insurance has entered a new era. Large brokers have begun to acquire smaller agencies at a record pace. But not all acquisitions are created equal. In most cases, smaller agencies get totally absorbed into their new parent organizations, with the previous owners (and often management) either retiring or assuming new roles, submitting to new priorities and standards of corporate culture. For some brokers, this works well. For many, it’s a rigid structure with an abrupt transition – an imperfect fit at best.

What are the alternatives to complete transfer of ownership and identity? Some smaller agencies will choose to remain fully independent, but their limited pool of resources will make it increasingly difficult to compete with the ever-growing players around them. There is, however, another strategy for retaining a degree of independence and identity while also remaining relevant and competitive.

Unlike most brokerage acquisitions, Vantage leverages flexible perpetuation to enable partial sale, allowing for continued direct ownership, share in future profits, preserve day-to-day operating autonomy, and benefit from capital investments, and gain access to M&A capital and resources.

To break it down:

  • Entrepreneurs sell a majority stake in their agency and retain a direct and personally meaningful minority equity position
  • We provide investments in talent, technology, and infrastructure that are determined and implemented collaboratively
  • Our non-intrusive operating model empowers partners to continue directing day-to-day operations with brand, principles, and standards unchanged
  • Opportunities abound for cultivating organic revenue and margin-enhancing synergies through collaboration with other platform partners

Integrity, transparency, respect, and collaboration form our core values, and differentiate the Vantage model from more traditional, less flexible, and often less effective mergers and acquisitions.

To learn more about Vantage and your options in tomorrow’s brokerage marketplace, connect with us today!