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RISING INTEREST RATES AND YOUR AGENCY VALUE
The two most frequent buyers of insurance agencies today—while markedly different—are faced with the same problem at the core: if they pay the same price for your agency today, that they would have paid just twelve months ago, they will have a lower return.
Private equity firms don’t borrow money, but as interest rates go up, their investors expect a better return, so their return on investment must improve in order to keep them competitive with their investors.
Traditional buyers that likely borrow funds to purchase, have to pay a higher interest rate.
The cost has gone up for both–and prices paid have gone (and are going) down, not unlike buying a home when mortgage rates have gone up.
But wait—does this mean the price on every agency is stabilizing or declining?
The answer is “NO!” When an agency is marketed to the right potential buyers, with a strategic fit that maximizes—not just value—but carriers and culture, “value” takes on a whole new meaning.
Do you know those buyers? Probably not. And if you’re responding to a single-source buyer (someone buying for one firm) directly, you’re unlikely to find them. We, on the other hand, are a consulting firm that has brokered 84 agency sales to an array of buyers by understanding buyers’ needs and matching them with sellers’ assets.
If you’re in the market to sell, let’s talk.