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Insurance Agency Acquisitions: What Buyers Need to Know

Gary W. Miller

by Gary W. Miller

August 22, 2022

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Buying an insurance agency can be an excellent way for a larger agency to speed up its growth. Since smaller agencies normally sell for a lesser multiple of EBITDA, acquisitions can often lead to an immediate boost to the value of a larger agency. In addition, acquisitions can bring talented new leadership to the acquiring agency, and good people are always in demand. Learn what insurance agency buyers need to know when engaging in an acquisition.

What are key provisions that buyers should include in a purchase agreement?

One of the most important provisions for a buyer is to subject each of the principals of the seller to a non-competition covenant, often five years, that prohibits the principals from engaging in the sale of insurance for anyone other than the buyer for the term of the non-complete. Without the non-compete, the buyer has no way to retain the business it just purchased. Often times, there are producers working for the seller that are not principals of the seller. It can be equally important to subject these producers to non-competition agreements or at least non-piracy agreements.

Another important element of the purchase agreement for buyers is an indemnification provision that adequately provides for payment by the seller to the buyer in the event of a breach of the representations, warranties and/or covenants of the seller contained in the purchase agreement.

What are some challenging provisions to look out for?

Today’s purchase agreement can be long and complicated—90 or more pages of deal description, representations, warranties, covenants, and indemnification provisions. Buyers always retain the ability to terminate a producer (including a seller), and sellers who find themselves terminated by the buyer (or who voluntarily resign) can be tempted to test the enforceability of the covenant not to compete. This can often lead to expensive litigation. Well drafted and enforceable covenants not to compete and/or non-piracy agreements are key to a successful transaction.

How have sales contracts changed for buyers recently?

The most interesting changes in purchase contracts over the past ten or fifteen years have revolved around the increasing use of buyer equity as a portion of the purchase price. This is true not only for buyers that are publicly held, but also for the increasing number of large serial acquirers owned by private equity companies. In addition, equity of the buyer is often used as an incentive to the seller’s non-owner producers, offering some their first real opportunity to participate in the growth of the business as a whole.

Does BoyarMiller help insurance agency buyers?

BoyarMiller has over 30 years of experience helping agents and owners of insurance agencies build and maintain the value of their businesses, especially in times of transition or sale. Our senior deal team members have a long history in representing agency buyers. While agency acquisition work is handled as a part of our merger and acquisition practice, there are unique aspects to acquiring insurance agencies that would not be familiar to M&A attorneys not practicing in this area. Recently, BoyarMiller’s insurance agency M&A team has handled transactions as small as a single owner as the primary producer to agencies with multiple offices, ten or more shareholders and numerous producers. Learn more.

About BoyarMiller

BoyarMiller is a mid-size Houston-based law firm that advances client business goals by bringing new possibilities into focus with confidence and clarity to achieve extraordinary outcomes. Since 1990, we have been providing practical and smart business solutions. Our firm is comprised of three practice groups—corporate mergers and acquisitions, real estate, and litigation—and we serve multinational companies, middle-market businesses and entrepreneurs in need of collaborative and strategic representation. See for more information.

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