Nothing Ever Changes

I’ve been alive ever since I was born…I’m going to live forever!

Flawed logic can only take one so far.

My team and I sell and work with a lot of title companies and see many distinct behavior and attitude patterns. Some agency owners view the world like the guy who crashes his car into a tree and then decides it’s probably a good time to buy collision insurance. Others understand that business models and careers, like seasons, change. They recognize and accept change as inevitable and plan for that in a logical, systematic and orderly fashion.

Title agency Sellers who we agree to work with these days mostly fall into two buckets. The first is an agency whose business has grown and recognizes that they need a partner to take them to the next level. At the same time, the owners see value in de risking and taking some chips off the table. Those types of Sellers are highly coveted by growth minded Private Equity firms as well as some Strategics. Value and deal terms are maximized when the Seller retains a significant portion of equity which tells the buyer/investor that their interests and that of the Seller are fully aligned.

Others simply face generational issues and seek to monetize the value of their life’s work in building an agency. There are a horde of factors which influence value. From a timing perspective it is always prudent to sell before you need to IF you want to get the most out of the deal. One element of the valuation relates to who takes on the risk of business flowing in subsequent to a sale. If the Seller can stay on for a while, then the earn out structure should reflect their willingness to ensure business continuity and allow for sufficient time to transfer the key relationships they have which generate volumes. That’s a broad and general truism -but usually means more favorable deal terms. There are some agencies with different dynamics, such as ones with a robust sales team who account for the majority of volumes, which alters the approach.

For the last twelve years my team and I have been guiding title agencies and helping them assess the best path to take. Sometimes, we advise Sellers not to sell yet and instead work with them to improve margins using methods we know from experience will produce meaningful results quickly.  We also work with Private Equity and title agencies who have already found prospective transactions and seek the benefit of our team’s experience in assuring the valuation and deal terms are maximized.

While we mostly are engaged by larger firms who want us to conduct a full M&A process from start to finish, we also offer a more limited, focused and streamlined process specifically designed to meet the needs of smaller transactions and structures including acqui-hires.

If your challenges include determining what to do next, give us a call!

-Howard Turk

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