Two New York state independent agencies recently announced a transaction.  The Riverfront Agency was recently acquired by Frank H. Reis, Inc.  Riverfront is a P&C shop with approximately $5m in premiums.  

Interestingly, this deal is the first P&C deal in New York state that we've seen in some time - but probably falls in line with the significant uptick in insurance M&A activity during the second

This is the question that we are getting day in and day out.  Our take (in short):  something is going to happen, but not the sweeping changes that the administration is looking for.  As a general statement, we don't see a wholesale impact on benefits / H&L shops out there. 

Of note, the bigger impact that we are seeing right now groups evaporate as companies shut down - certainly a regionally

Arthur J. Gallagher recently announced the acquisition of the Walker Taylor Agency, a North Carolina P&C shop.  Work is a notable agency with a long history - dating back some 140+ years.  As outlined, current management will remain in place going

Brower Insurance, the largest P&C broker in the Dayton market, recently announced the acquisition of Benchmark Insurance.  Interestingly, this is the second deal for Brower inside of the last 6 months- although they note that they do not plan any further deals.  

Marketing an Agency for a Transaction

Here is a question that we often get asked: how do you market a company? While the answer invariably is “it depends” – we’re outlining below some of the general steps that we take.

One note: it’s a generally accepted principal that a deliberate approach resulting in an offer received through a bid process is likely to be 20% higher than an

In our line of business we hear a lot of motivations behind “doing the deal.” In our experience, the best reasons often include joining a bigger team, gaining access to more resources, and continuing to grow your net income post closing. Access to more / better markets and less administrative duties can be a powerful motivator for a top producer.

But what about those that want to exit or

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So we continue to hear about the credit crisis - and a lot fo that talk continues to center around the commercial paper market. When we hear problems about liquidity in the market, etc. the reference is often to this short term paper market - not the longer term loans and lines of credit that middle market companies rely on.

So what is commercial paper? And why is it important? Simply explain, its a short term loan used to finance operations. Although it can take several forms, it is a security instrument that matures in under 270 days and is exempt from SEC oversight. Large corporations and financial institutions are able to issue paper - in return for the promise of repayment and a yield - much more cheaply than they could access a line of credit from a bank.

At issue, now, is that that market has evaporated for all but the strongest companies, and liquidity at the far end of the yield curve is much more effect. This is highlighted by the current run on the Fed's "borrowing window," which as of Friday (October 4) had loaned $348b to banks. With the commercial market frozen, they are forced to tap the Fed lending window to access short term liquidity.

And here is the trickle down effect: on the corporate side, triple A rate companies such as General Electric are able to still sell, but others are having bigger problems. Those that cannot go to banks. According to Bloomberg, "Lenders are balking at offering cash for longer than a day even as central banks pump an unprecedented amount of money into the banking system." Companies then, in turn, must tap more expensive lines of credit.

And thus the trickle-down effect: with large corporations facing increased financing expenses and a working capital crunch, smaller companies can expect:

• Less favorable AR / AP terms
• Increased financing expenses
• More difficulty / scrutiny accessing lines of credit, etc

Of course the credit crisis is complex - especially if CDO's, CLO's, credit default swaps, and mortgage backed securities are not part of your every day conversation. That in mind, we thought we'd add this as a back ground primer- Marketplace does a good job at explaining one of the conerstone issues of the crisis - mortgage securitization and CDO's.

Information Arbitrage (a great read by the way) had a post regarding the future of Investment Banks. The whole post is worth a read, but a tidbit that we certainly agree with:

 

Investment Banking 2.0 will be the re-emergence of the boutique, the focused, nimble, high-touch firm that was the bedrock of capital formation in the early years of the stock market boom. Because these mega-firms being created at the urging of the Treasury are not sustainable.

This couldn't be more true for mid-market companies.  The bulge bracket banks have been focused on returns trading complex products on their own account.  And while M&A is always a fee multiplier in a bulge bracket bank, more recently other products have taken center stage.

As a middle market company, your needs are different.  You need a "high touch" firm that can offer expertise when you need it - namely when you need to recap, or are working through an acquisition.  The boutique is just what the doctor ordered.