Protect your investment by validating book quality, carrier contracts, and retention before closing on an independent agency acquisition.
Find Insurance Agency (P&C) Acquisition TargetsAcquiring a P&C independent agency means buying recurring commission income tied to client relationships and carrier contracts — not hard assets. Due diligence must confirm the book of business is clean, transferable, and not dependent on a single owner or carrier before committing capital.
Validate the quality, durability, and concentration of commission income across personal and commercial lines before assessing valuation.
Request 3–5 years of retention data by line of business. Target agencies with 90%+ annual retention. High attrition above 15% signals systemic service or pricing problems.
Identify any single client exceeding 10% of total revenue or any carrier representing more than 30% of written premium. Concentration risk directly impacts deal structure and earnout terms.
Break down revenue by base commissions (8–20% of premium) versus contingency or profit-sharing income. Contingency income is volatile and should be excluded from core valuation multiples.
Confirm that carrier contracts and appointments can legally transfer to the buyer and that no regulatory or E&O exposure exists.
Contact each carrier directly to confirm appointment transfer approval is required and achievable. Some carriers require new underwriting review, which can delay or block the deal.
Request full errors and omissions claims history for the past 5 years. Review any DOI complaints or disciplinary actions. Unresolved E&O exposure can create post-close liability.
Verify all active producer licenses, non-solicitation agreements, and employment contracts. Confirm licensed staff can remain post-close to service accounts independently of the seller.
Assess key person dependency, AMS data integrity, and the seller's ability to support a structured transition that protects client retention.
Audit the AMS (Applied Epic, HawkSoft, or similar) for complete, current policy data. Poor data hygiene signals operational risk and increases post-close servicing costs.
Identify clients who have direct relationships with the selling principal. Quantify revenue at risk if those clients follow the seller. Structure earnout retention periods accordingly.
Negotiate a 12–24 month seller transition agreement with defined client introduction milestones. Link earnout payments to verified retention metrics, not just premium volume.
Verify the Insurance Agency (P&C) acquisition qualifies for SBA financing, the purchase price is supportable by the verified cash flow, and the deal structure protects the buyer's downside.
Confirm the Insurance Agency (P&C) meets SBA 7(a) eligibility requirements: the business is for-profit, U.S.-based, within SBA size standards, and the buyer meets personal financial requirements. Some industries have specific SBA restrictions — verify before LOI.
Model verified normalized EBITDA against projected SBA loan payments at current rates. A $1M SBA 7(a) loan at 10.5% over 10 years costs approximately $13,000/month. The Insurance Agency (P&C) must generate at least 1.25x debt service coverage after a market-rate manager salary to pass underwriting.
Confirm the seller note is properly subordinated to the SBA loan and goes on 24-month standby as required by SBA rules. If an earnout is included, define exact measurement metrics, time period, and dispute resolution process before signing the purchase agreement.
Before signing a Letter of Intent, request these documents from the seller. Missing or incomplete items are a red flag — not a reason to proceed without them.
Most independent agencies trade at 4–7x EBITDA or 1.5–3x annual recurring commissions. Commercial lines books with strong contingency income and 90%+ retention command premium multiples near the top of that range.
No. Most carrier contracts require written approval for ownership transfers. Some carriers conduct underwriting reviews of the new owner. Buyers should begin carrier approval conversations early to avoid closing delays.
Tie earnout payments to verified client retention rates and premium volume at 12 and 24 months post-close. Avoid earnouts based solely on revenue, as premium increases can mask actual client attrition.
Client attrition triggered by the selling principal's departure. Mitigate this with a structured 12–24 month seller transition, staff retention incentives, and earnout provisions that align seller interests with retention outcomes.
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