As we approach the beginning of the NFL season following the protracted collective bargaining debacle, I thought I would provide some commentary about business mergers.

While a potential transaction isn't likely to involve $9 billion, your business is just as important to you as an NFL franchise is to an owner - or maybe more so. Many of you are trying to figure out the best future course for your firm.

Over the last several years, we have seen an increase in the number of insurance agency and brokerage mergers at all levels, and we expect this trend to continue and possibly accelerate due to market conditions, health care reform, financial pressures and demographic trends.


The PPACA effect

PPACA has a large number of benefits advisers nervous, confused and apprehensive about the ongoing valuation of their businesses. And rightfully so. It's going to take a considerable amount of thought and effort to maintain a benefits practice over the next four years, let alone grow the revenue base.

Do you still have that burning fire in your gut that's going to be required to be successful? Maybe you are questioning your own personal motivations, and that voice in the back of your head is speaking more loudly and frequently, asking whether it is time. So if you think you might have the urge to merge, you should find this column to be of value and interest.

We will be examining why a merger should be considered and what are some of the characteristics of a solid merger candidate. We will explore what are some of the strategic reasons to merge entities, and what are some of the operational issues to be considered. And we will consider what types of firms may be the ideal merger partner candidate.


Why should you even consider merging businesses?

So let's get started. Why consider merging your business at all? What do you hope to accomplish with a merger transaction? This is the time to think strategically. There are many reasons to consider a merger with another complementary or synergistic business. Among the reasons are:

* Strengthen the management team.

* Acquire new skills and expertise.

* Broaden the product set.

* Increase the top-line revenue potential.

* Diversify revenue sources.

* Achieve operational efficiencies.

* Reach critical mass.

* Improve profitability.

* Accelerate growth.

* Qualify for more lucrative carrier contracts and contingencies.

* Enhance technology capabilities.

* Open new markets.

* Add sales channels.

* Perpetuate one or both businesses.

* Provide an exit strategy for some principals.

All these issues and some others that you may be contemplating right now are valid business reasons to consider a merger. Which applies to your business? Is there more than one reason that applies to your circumstances? If yours is like most firms, this is very likely. So don't feel bad about the current reality. Instead focus on the possibilities in the future.


Starting point

But where should you start? Invariably the best place is with an honest assessment of the strengths and weaknesses of your business today. Only you are likely to really know where the gaps in your firm's capabilities exist and how to bridge those gaps. What pieces of the puzzle is your business missing? What additions would really put it on a steep growth trajectory? Would your business perform better with some new leadership? What are your personal motivations? (Be sure to read "Crossing the value gap" (p. 82).

Be honest with yourself. If organizational objectivity is difficult to achieve, then seek the assistance of a knowledgeable, professional business adviser. We've helped many owners and partners figure out a game plan for the future of their business.

The nature of the strengths and deficiencies of your business will largely determine who the ideal merger candidate will be for your specific business practice. So the evaluation of potential merger candidates is largely about finding business partners that have complementary or synergistic business practices, wherein both businesses benefit from not having to build a new practice with all the attendant time and expense associated with the creation of a new business entity.


Missed opportunity

For example, if your business currently offers group, employer-paid benefits, and you see that your firm is currently passing up a huge opportunity by not offering voluntary benefits, perhaps merging with a firm that specializes in these product lines would make sense.

The merger partner presumably has domain expertise, carrier relationships, technological capabilities and sales channel partners, for example.

And the merger candidate in turn may be looking to affiliate with a larger firm that has benefits plan design expertise, access to different carrier relationships, and a large group of core benefits clients who are undoubtedly making plan changes that create benefits gaps that could be satisfied by voluntary benefits offerings. Clearly, these two businesses would be synergistic and could greatly benefit from each other's expertise and relationships.

Or perhaps you are interested in having exploratory discussions with a property and casualty firm. In today's climate, that might make perfect strategic sense. After all, P&C firms are not dealing with all the regulatory turmoil that the benefits industry is experiencing. Consequently, their customer bases and revenues should be more predictable and more stable for the foreseeable future.

In addition, P&C organizations usually have solid working relationships with the C-suite, in particular with CFOs and presidents. That's where you want to be positively connected, right? With that kind of introduction from your business partner, prospecting and cross-selling should be much easier.


Your business

You can see that there are a number of reasons why a merger might be considered. In light of these examples and brief commentary, now think about your own business. What would benefit your business most? Even if you don't exclusively own the business and share ownership with others, you still need to have substantive opinions on this topic. After all, it's your livelihood.

Don't be afraid to "think outside the box" when it comes to considering potential merger candidates. Today's competitor or administrator or vendor may be tomorrow's ideal merger candidate, depending upon what you are trying to accomplish. Think broadly and strategically about what will benefit your clients and customers most in the future.

Don't focus on the way you conduct business today. Think about how you want to be conducting business two or five years from now. And think about the roadmap that will get you there.

Somewhere out there on the horizon, there may be a fork in the road. That exit ramp on the highway of life may just be a merge that leads to a merger.

Kwicien is the managing partner at Baltimore-based Daymark Advisors. He can be reached at

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