Free Valuations, Clear Ideas
In contrast with certain of our competitors involved in the insurance M&A sector, we DO NOT CHARGE vendors for our services.
With high level business information, we are able to put our clients in touch with a range of acquirers to determine the value of insurance businesses.
Valuations will vary from business to business and from acquirer to acquirer. There is no “one size fits all”. A number of factors will be taken into account, including:
- Profitability and, in particular, profitability post acquisition, after the removal of certain existing costs, for example Directors’/shareholders remunerations.
- Portability – whether a business needs to remain in situ or whether it can be integrated into an acquirers’ existing location, thus saving on office costs.
- Classes of business – whether an insurance broking business transacts mainly commercial lines or niche business, which is preferable, whether a PMI broker transacts mainly group business (again preferable), whether an MGA has a good market share in a particular class of business (again preferable) and whether an IFA’s business has a focus on pensions and investments (again preferable).
- Potential – whether there is the potential for further growth within the business. The greater the potential, the higher the valuation.
The list goes on but the above factors are some of the main factors which come into play.
HOW MUCH IS YOUR BUSINESS WORTH?
Again, in determining a valuation, the above factors will be taken into account and the acquirers’ appetite, both for acquisition and for a business such as yours, will also play a part.
There are also a variety of valuation methods, which are applied by acquirers, and these methods will vary from acquirer to acquirer.
The main valuation methods will include:
- Applying a multiple of earnings i.e. a multiple of turnover (earnings). We are currently seeing valuations, dependent on the various factors, of up to 3.75 times, even 4 times earnings.
- Applying a multiple of EBITDA, which is essentially current operating profit, adding back any costs which can be removed post acquisition and removing any exceptional (one-off) expenses. This is otherwise known as Adjusted Profit. We are seeing valuations of up to 7-9 times EBITDA and in some cases, higher.