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The True Cost of Selling Without an Advisor

The Numbers Are In, and They Are Staggering

In our April 2022 blog, we announced that Sica | Fletcher had completed the most comprehensive study in the history of our industry on multiples paid in insurance agency and brokerage acquisitions. We did this by aggregating and analyzing the data on the nearly 400 closed transactions on which Sica Fletcher has advised over the past three years. One of the questions we asked was, “Does using an advisor have an impact on the multiple paid in a transaction?” The answer we found was a resounding yes.

The numbers are in, and they are truly eye-opening. The bottom line is that there is an enormous cost for trying to sell an insurance agency without an advisor.

Through many articles, infographics, and videos, we warned about the real and hidden costs of trying to sell an agency without using an advisor. Now, the data that supports these contentions is in. Here is what we found:

  • Using an Advisor Has an Enormous Impact on the Multiple Paid – Advisor-led transactions traded at substantially higher multiples than deals in which the seller did not have an advisor. In 2021, for example, sellers who engaged an advisor received an EBITDA multiple upon sale that was on average 54% higher than sellers who did not retain an advisor. And this does not consider the calculation of Pro Forma EBITDA, which is in itself an area where sellers typically are at a disadvantage to buyers when they do not use an advisor. Pro Forma EBITDA tends to be much higher than actual EBITDA.

  • The Disparity Has Increased Over Time – The data made it clear that as multiples have increased over the last three years, sellers who do not use an advisor are increasingly being left behind. In 2019, the premium for using an advisor was a 28% increase to the average EBITDA multiple. In 2020, this rose to 41%, and by 2021, this premium stood at 55%.

  • The Smaller the Agency, the Less Likely They Will Use an Advisor When Selling – The data is very clear: larger agencies almost always use an advisor when they sell. The smaller the agency, the less likely that tends to be.

  • The Smaller the Agency, the Greater the Disparity Becomes on Using an Advisor – In 2021, agencies under $1 million of revenue that sold without using an advisor sold at a 52% discount to the EBITDA multiple at which those using an advisor sold. In comparison, the discount when not using an advisor in transactions between $1 to $4 million of revenues was 23%, still extremely material, but significantly less than that for smaller transactions.

The numbers are very clear. If you sell your agency without using an advisor, you run the risk of getting paid significantly less than if you retain an advisor. The data shows that EBITDA multiples are significantly higher on average for agencies using an advisor when they sell. And this does not take into consideration the calculation of Pro Forma EBITDA or access to the best alternative partners for the agency.

Sica | Fletcher’s valuation study is the one analysis of insurance agency and brokerage M&A you will want to review. If you would like a copy or would like to have a discussion regarding your strategic options, please email or call us:


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