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Aging baby boomers are behind uptick in sales of independent agencies

Aging baby boomers are behind uptick in sales of independent agencies

Some insurance brokers' recent divestitures have been attributable to the desire of aging agency owners to retire.

But in many of those scenarios, the acquiring brokers have been reluctant to let the former business owners walk away after closing the deal.

“Most independent agencies are owned by baby boomers” looking to either “cash out or do succession planning,” said William F. Ziebell, executive vp, north central region at Gallagher Benefit Services in Itasca, Ill., a division of Arthur J. Gallagher & Co.

AJG made 24 acquisitions in 2011. “They anticipate an increase in capital gains taxes and want to do it now before that happens,” Mr. Ziebell said.

But when GBS or its parent company acquires a smaller, regional broker, it requires the management or owner of the acquisition target to stick around.

“We value experience and tenure, but also the people who are going to be around for a while” because “we get so many good ideas from our merger partners,” Mr. Ziebell said. “We are a bottom-up innovator.”

Marsh & McLennan Agency L.L.C., a division of Marsh Inc. formed in 2008 to serve the middle market, has a similar philosophy about ensuring the acquired broker's key talent comes along with the deal.

“We're not looking for people to join us and then retire. We want to make sure they are actively involved,” said David Eslick, president and CEO of MMA, which completed 10 acquisitions in 2011. “If you're just buying a book of business and don't have the continual new production, you're buying a depreciating asset. We want a growth engine, so we partner with people who have developed those relationships.”


In addition, “we want a responsible transition to make sure we don't confuse the clients of an organization about who they're doing business with,” which is why MMA allows acquired agencies to retain their original name for an extended period of time after an acquisition, he said.

“The aging ownership base of agencies without clear perpetuation plans will always open doors” to mergers and acquisitions, said Bill Pridgeon, executive vp and CFO of the Hylant Group Inc., a middle-market broker in Toledo, Ohio, that recently acquired AGIS L.LC., an independent, full-service employee benefits agency with offices in Birmingham, Mich., and Orlando and Jacksonville, Fla.

However, “we're really not looking for someone looking to sell, and ride off into the sunset and take that institutional knowledge away. We're looking for those we can partner with for a while,” he said.