One industry trend that has emerged over the last several years is that of agency mergers and acquisitions. Regardless of the specific industry issues that have fueled this latest round of activity, mergers and acquisitions are part of agency life.
When an agency is involved in an acquisition, one of the key pieces of information that the various parties want to know is how much an agency is worth. The seller wants to know how much the agency should sell for. The buyer wants to know that the asking price is reasonable and not inflated. And in a merger, the parties want to know the comparative and relative values of the various pre-merger entities.
But even if an agency isn't involved in a merger or acquisition, knowledge of its value or worth can be an important indicator of financial performance. Owners and managers need the "cold hard facts" for review, benchmarking, and adjustment of business plans. Periodic financial valuations, regardless of the purpose, make good sense.
Enter Marsh-Berry
Marsh-Berry & Company, Inc. is a recognized name in the insurance industry. The Concord, OH firm was established in 1981 and is a leading provider of insurance consulting services. The company directs its services through four areas: 1) performance enhancement; 2) management consulting; 3) investment banking; and 4) information and technology.
Sounding Line readers may have noticed a short news item in our February issue about Marsh-Berry's new Online Value Estimator, an Internet-based tool that helps agents estimate their agency's value. For more information, we talked to Marsh-Berry's vice president of information services, Doug Terrill.
According to Terrill, the development of the Online Value Estimator was a natural outgrowth of existing services Marsh-Berry already provides. One such service is the subscription-based Perspectives on High Performance (PHP) agency assessment. The PHP assessment collects agency financial information that drives a series of calculations that leads to a performance analysis. Of course, another Marsh-Berry service is the traditional in-agency valuation that performs a detailed on-site analysis based on both tangible data and intangible assessments.
Terrill explained that the primary focus of Marsh-Berry's subscription-based services is to appeal to a broader market, especially smaller agencies (under $2 million in revenues) that haven't yet used their traditional services.
How the Online Value Estimator works
Conceptually, the Online Value Estimator is relatively simple. Essentially, the user enters data into a series of online data collection screens, and the computer performs the calculations and generates a valuation figure.
For existing subscribers who have already provided similar data for other Marsh-Berry services, the process is less time-consuming because existing data is automatically imported to populate the Estimator's data collection screens. For agencies that are not subscribers, data collection and entry is more time-consuming — two to four hours — and will likely require the involvement of the agency bookkeeper or accountant.
An online sample presentation at www.marshberry.com/Newsletter/ValueEstimatorTour.htm illustrates Marsh-Berry's five-step process.
Value and limitations
For agencies that already subscribe to Marsh-Berry services and have undergone a complete valuation process, the Online Value Estimator will likely be a more useful tool than for those who approach the process as a one-time event. Terrill said that an agency typically needs to be involved in the valuation process over a longer period of time to get an accurate picture of its value.
Existing Marsh-Berry subscribers can purchase a 30-day subscription to the Online Value Estimator for $295; non-customers, $395.
From the product's name — Online Value Estimator — users need to realize that the calculations provide only an estimate. Terrill cautions that the online tool should not be viewed as a substitute for a thorough on-site agency valuation and consultation, which can typically cost several thousand dollars.
From my limited understanding of agency accounting, the online sample presentation provides an informative and attractive option that I can imagine would be a useful tool for agents interested in obtaining a valuation. And, at $395, the price is hard to beat.
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