When you're looking to sell your insurance agency, one of the most critical factors to consider is the impact on your team. People are the lifeblood of any organization and their well-being directly affects the company's success—both before and after a sale.

A thriving team can be the key to a smooth and successful transition during an acquisition. If your team views the sale as a positive step, they are more likely to engage with new leadership, continue building strong relationships with customers and carriers, and contribute to the long-term success of the business.

The insurance agency mergers & acquisitions (M&A) market saw a significant drop in activity in 2024, with fewer deals completed compared to recent years, according to OPTIS Partners. However, while down from the M&A boom in 2021, the pace of deal activity appears to be stabilizing, with 198 deals announced in the third quarter of 2024, up 14% from 173 in the second quarter of 2024 and up 21% from 164 in the first quarter of 2024. Further, year-over-year deal activity is down 5% from the third quarter of 2023 and 13% below the previous five-year average, according to the report.

With a stabilizing M&A market, small agencies should start preparing to take advantage of emerging opportunities. Early planning and positioning will be key for those looking to navigate the evolving M&A landscape.

Why Agency Owners May Want to Sell

Many small agency owners find that as their business grows, the burden of managing daily operations, like accounting, legal, HR, and IT, pulls them away from their core strengths: leadership and sales. Owners often want to keep autonomy and their local culture, but they want and need support. Some acquirers can provide support around these tasks and help owners focus on engaging with customers and driving business growth.

Another primary motivator is breaking through growth barriers. As agencies expand, it's common to hit a plateau where current networks, resources or product offerings limit further progress. Partnering with a larger organization can open new doors. Access to broader carrier relationships, specialized products and leadership development opportunities can propel smaller agencies to the next level, while collaborating with leaders who have successfully scaled their businesses can spark the innovation needed to move past stagnation and continue thriving.

Personal circumstances may also drive the decision to sell. Family, health or changing life priorities shift focus, making it harder to juggle business demands. Partnering with an acquisition firm provides flexibility, helping owners align the sale with their personal goals.

Whether you're seeking a long-term partnership or a phased exit, negotiating a deal that fits your unique situation ensures a smoother transition and a fulfilling next chapter in your career and personal life.

Key Factors to Find the Right Buyer

Once you've decided to sell, finding the right acquisition team becomes crucial. It's not just about financials—your choice of buyer will impact your team's future—but asking how potential buyers will support your team's well-being and growth will help you secure a sustainable, prosperous future for everyone involved.

In evaluating a potential acquirer, consider how their strengths align with your business goals. The right buyer won't just elevate your business. They will enhance your team's capabilities, support them through business cycles and ensure your business continues to thrive.

Here are five key factors to consider when evaluating potential acquirers:

1) Collaborative, ownership-driven culture. A great buyer fosters collaboration and ownership across the organization. Look for a company that encourages teamwork and empowers teammates to take ownership of their work. Buyers that prioritize internal relationships and offer growth opportunities help ensure long-term success for your team.

2) Knowledge and understanding of both broad and niche insurance products. The right buyer will expand your service offerings while maintaining specialized knowledge. Look for dedicated teams in areas like surety, cyber or transportation to ensure specialized service, optimal insurance pricing and risk consulting for customers in unique markets and industry verticals.

3) Strong relationships in target markets. Carriers often operate regionally, so your buyer must have deep connections within your target markets. To maximize success post-acquisition, ensure that their product portfolio aligns with the specific needs of your current customer base.

4) Tailored administrative and accounting support. Back-office support varies widely. Look for a buyer that supports your strengths while adding value where needed, like cybersecurity or finance talent. The right buyer will fill gaps without disrupting your local team.

5) Effective recruitment and training programs. A strong buyer will have systems to help the team grow. Look for buyers who offer advanced training, enhancing your team's skills and improving customer engagement. Additionally, a company with solid recruitment efforts will ensure that your agency continues to attract skilled professionals who can complement your existing team and help fill any gaps created by the acquisition. Whether it's sales training or filling key administrative roles, the right buyer will know how to take your team to the next level.

Caring for Your Team During and After an Acquisition

Your team is your agency's greatest asset. Making sure they feel supported and confident about their future with the new company is crucial for a smooth transition.

Here are seven key areas to address with your team as you navigate the acquisition process:

1) Develop a clear communication strategy. Create a proactive communication plan to inform your team about the acquisition. Some deal sheets have confidentiality clauses, such as nondisclosure agreements, so be careful about what and when you share any news. However, a clear strategy reduces anxiety and builds trust. Follow up with in-person meetings so teammates can ask questions and feel reassured about the transition.

2) Clarify tenure and benefits. Long-term teammates will want to know if their tenure will carry over after the acquisition, affecting retirement vesting, paid time off and other benefits. Be transparent and communicate any benefit changes as soon as possible.

3) Communicate job security. Reassure your team that key staff will be retained. Clearly outline who will remain after the sale. If any positions will be affected, communicate openly and explain why those changes are necessary.

4) Highlight new growth opportunities. Some teammates may be eager for growth and development. An acquisition can create new opportunities for advancement within a larger organization. For those interested in exploring new roles, the acquiring company may offer positions in different locations or broader leadership opportunities. Be a liaison between the two, connecting those interested in growth to the right teammates at the parent company.

5) Define working hours and expectations. In a flexible work environment, teammates may be concerned about potential changes to work hours. Clarify expectations around schedules, overtime and any new policies impacting remote work or hybrid work arrangements that may come with the transition.

6) Clarify reporting structure. Ensure your team understands how the reporting structure will shift after the acquisition. Make sure they know who they'll report to and if leadership changes will impact their day-to-day responsibilities. In situations where this isn't clear initially, maintain open communication while the reporting structure is being ironed out to help ease the transition for teammates.

7) Introduce new products and resources. Because you've done your homework in finding a buyer who will enhance your agency's strengths, the buyer may provide opportunities for your team to sell new products or services. Your teammates will appreciate the chance to expand their toolkit, which can fuel their career growth. Inform them early about the additional resources, products and capabilities the new company will offer.

By addressing these vital areas, you can help your team embrace the changes that come with an acquisition and feel confident about their future in the organization. Be respectful and open to concerns, but proactively keep the team focused on the big stuff. All acquisitions bring some level of change, so prepare accordingly. 

Red Flags When Evaluating a Buyer

It's not just about financials—your choice of buyer will impact your team's future—but asking how potential buyers will support your team's well-being and growth will help you secure a sustainable, prosperous future for everyone involved.

When evaluating buyers, it's essential to look beyond the financials. Here are four warning signs that could indicate the buyer might not be the best fit for your team's future:

1) Lack of focus on mutual improvement. A good acquisition benefits both parties. If the buyer only discusses how they'll enhance your business without acknowledging how your team can contribute to their growth, that's a red flag. The best buyers understand that your local knowledge and relationships add value to their organization, making the acquisition mutually beneficial.

2) Overemphasis on financials and ignoring the team. While financial due diligence is essential, a buyer who focuses solely on numbers and overlooks the well-being and development of your team may not be invested in long-term success. Your team's knowledge and morale are just as critical to maintaining your business's success post-acquisition.

3) Short-term cost focus. Beware of buyers or investment bankers whose first priority is cutting costs, particularly if those cuts could affect your team. Short-term savings often come at the expense of long-term growth, especially when staff reductions or operational changes undermine team morale and performance. Look for a buyer who values sustainable, people-driven growth.

4) Constant renegotiation of terms. Frequent renegotiation of the deal can signal a lack of commitment. This disrupts the process and may indicate that the buyer is not fully aligned with your long-term goals, particularly regarding your team. If they constantly shift terms, it could suggest they won't prioritize the well-being of your team after the deal closes.

By keeping an eye on these red flags, you can ensure that the buyer you choose will not only help grow your business but also respect the team and culture you've worked hard to build.

Vaughn Stoll is senior vice president and director of acquisitions at Brown & Brown.