How To Sell - Or Buy - An LTC Agency

Reno, Nev.

“I can’t believe I’m thinking about selling my baby.”

Thomas Long says that was the first thought that came to mind when another firm approached him about buying his long term care insurance agency, Wisconsin Insurance World.

In 2001, Long ended up selling the agency to the Heartland Group, which combined with Wisconsin Insurance to form LTCI Partners L.L.C., Madison, Wis.

Long told the story at a session on starting, selling or buying an LTC insurance distribution firm here during a long term care insurance conference organized by the Society of Actuaries, Schaumburg, Ill.

Most agency owners realize that they must sell at some point in time, whether due to age, health, a need for capital, a desire to perpetuate the agency while making a timely exit, or even burnout, Long said.

Whatever the reason, one of the first matters to take care of is to make it known to potential buyers that the agency is for sale. The owners should use all available networks, including carriers, industry publications, and broker general agents, in addition to making calls to known industry acquirers, Long advised.

Another early item of business is to determine what exactly is for sale, he said: stock in the company; its book of business; the agency’s “machine”–his term for its distribution network such as agents, or the brokers the agency does business with.

Finally, there is the brick-and-mortar part, which the acquirer may or may not want.

If the owner intends to stay for awhile after the agency is acquired, another important consideration is whether the 2 agencies are a good match for each other, he said.

Before negotiating terms, the buyer will want to see a 12-month profit-and-loss statement and a letter spelling out what’s being sold; including a valuation of the agency or the part of it that’s to be sold.

The seller needs a great attorney, Long said. “You’ll need one experienced in mergers and acquisitions. If your current attorney is not, find one that is.”

Ask others who have sold or bought agencies what lawyer they used, he said.

“The attorney doesn’t have to be local,” he said. “You want someone who can understand your business.”

The owner who plans to stay on should make a personal visit to the other agency and talk to their key people, he said. Also important: Get clarification of what your duties would be post-sale, he advised.

For the owner who is not staying, a key consideration is to make sure staff is taken care of. “They deserve that from you,” Long observed.

Employment agreements will help protect producers and other staff, but it’s also important for the owner to be sure it’s the right organization for them and their clients, he said.

Another speaker at the meeting, Thomas Skiff, advised those shopping for an LTC agency not to jump at the first one that comes along. A decision to buy “must be part of your strategy and your plan to grow your agency,” said Skiff, president of LTC Global Inc., Medford, Ore.

One very good reason to buy a given agency is that it could substantially improve the income one receives from certain carriers, he said.