Primary Agent - August 2023

LINDSEY

SHARES HER AGENCY OWNERSHIP JOURNEY

ALSO INSIDE

EXCLUSIVE MEMBER MAGAZINE

COVERAGE FOR COLLEGE KIDS

DUE DILIGENCE IN M&A DEALS

Bill Wilson explores the adjustments your customers with college-bound children likely need to make to their insurance programs.

8

Lindsey Petrillo, president of IA&B Member Agency Eric W. Snyder Insurance Agency, shares the experience of acquiring her mentor’s agency after his passing.

JOIN

is general in nature and not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and/or other professional advisors concerning specific matters before making any decisions. We disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.

Jen Martin, of MarshBerry, discusses the importance of the due diligence process in merger and acquisition deals and outlines the top pitfalls that it can uncover.

SUPPORT IN THE HARD MARKET

When I started at IA&B, 18 years ago almost to the date, the industry was on the tail-end of a hard market. I didn’t get the full experience of such a market, and in 2006 we moved into the soft market we have been experiencing since.

That all has changed, and it has changed quickly. The market has hardened significantly, and all indications are this could be the new norm for some time. I want to remind you that in an environment like this, IA&B is here for you:

1. If any carrier takes an action that you think is improper, please advise us. We are well-versed on the laws in our three states, and we can advise (and even take action) should any carrier act in a way that isn’t allowed by law.

2. If you are in need of markets, either because your current carriers have stopped writing, or you’ve lost an appointment, please look into IA&B’s market access program – Independent Market Solutions (IABforME.online/IMS). We can help you place business, without a direct appointment.

3. Unfortunately, carrier insolvencies are a byproduct of a hard market, and we expect to see some over the coming years. IA&B has resources available to assist agencies navigate this uncommon situation.

Also, while a hard market may present some difficulties and additional work, keep in mind it is an opportunity for the independent agent to shine. The lowest-possible premium is no longer the focus in this market, but instead discussion turns to coverage and stability of carriers. Your role as an advisor to your clients is highlighted, and it’s a big advantage we have.

IA&B will be presenting further resources tailored to this market over the coming year, and beyond. While the market is changing, our dedication to our members is not.

Until next time,

INSURANCE AGENTS & BROKERS

650 Wilson Lane, Suite 200 Mechanicsburg, PA 17055

191 Main Street, Annapolis, MD 21401 800-998-9644 | IABforME.com

IA&B BOARD OF DIRECTORS

OFFICERS

Richard M. Rankin, CIC - Chair

Murray Insurance Associates, Inc. | Lancaster, PA

Sarah Brown, CIC, CRM, AFIS - Vice Chair

Keller Brown Insurance Services | Shrewsbury, PA

MEMBERS

Greg Bennett Famous & Spang Associates

Aberdeen, MD

Kate Dawson, CPIA

Ferri Dawson Insurance

Murrysville, PA

Andrew Enders, Esq.

Enders

Harrisburg, PA

Len Gieseler, LUTCF

Evans Hauseman & Richard, Inc.

Pottstown, PA

Bruce D. Kraft, AAI, CIC

Arbor Insurance Group

Allentown, PA

Shayne McIntosh, CIC

JPI Insurance Associates

Dillsburg, PA

Chris Miller, CIC

Miller Insurance Protection Team

Jonestown, PA

Michael Papa, CIC, MBA

Diversified Insurance Industries, Inc.

Hunt Valley, MD

Bill Purdy

Purdy Insurance Agency, Inc.

Sunbury, PA

Kent Reynolds, CIC Blue Ridge Risk Partners LLC

Hagerstown, MD

Jason Rodriguez

Prominent Insurance Svcs

Wilmington, DE

Donna Roper

E K McConkey & Company

York, PA

Candace Shoupe, AAI, AIC

CBM Insurance Agency

New Castle, DE

Tara Silfies, CPCU

Hampson-Mowrer Agency, LLC

Bethlehem, PA

Bob Smyrl, CIC

Robert L. Smyrl, Inc.

Hatfield, PA

Michael Thomas

Lighthouse Insurance Svcs

Gambrills, MD

NATIONAL DIRECTORS

Mike Ertel (PIA)

The Jacobs Company, Inc. | Columbia, MD

Mark Monroe (IIABA)

Jason F. Ernest President & CEO

Griffith Insurance, LLP | West Chester, PA

Diana Hornung Hanby (IIABA)

IOA National, Inc. | Wilmington, DE

CLAIRE-IFICATION

QUESTION:

One of our carriers wants to extend the expiration date of the policy. Is that permissible? They are also asking us to look for coverage elsewhere.

ANSWER:

When this change in expiration date happens (most often on a commercial line account), it is generally followed by a nonrenewal notice. In our three states of Pennsylvania, Maryland, and Delaware, the answer to the question would be no, it is not permissible: a carrier cannot unilaterally extend the policy renewal date to meet the advance non-renewal notice requirement.

WHAT OPTIONS DOES THE CUSTOMER HAVE?

When faced with this situation, the customer can file a complaint with the regulator (most insurance departments have an online platform to submit a complaint).

WHY IS IT NOT PERMISSIBLE?

Most agents are familiar with the statute that governs policy non-renewals and cancellations. The statutes vary by state, but generally provide a timeframe for insurers to non-renew a policy. To do so, the insurer is required to send a non-renewal notice a

certain number of days in advance of the policy’s expiration date. In this case, it is likely that the carrier failed to send the notice within the timeframe allotted. However, artificially extending the renewal date to circumvent the issue is not proper. If the insurer missed the window for a nonrenewal notice, the insurer should carry the risk for another year.

Following a recent complaint, IA&B took the matter to the Pennsylvania Insurance Department. The Department confirmed that they believed the regulation does not allow carriers to modify the expiration date of the policy when the carrier misses the 60-day advance notice of nonrenewal. The bottom line is that “policyholders need certainty that their coverage program is secured for 12 months and not at the mercy of inappropriate renewals.”

The Maryland Insurance Administration and the Delaware Department of Insurance confirmed their interpretation was the same. As the market hardens, it is important

for members to be aware of this restriction so they can better assist their commercial customers.

Naturally, this applies to a regular non-renewal, not one where there are issues of misrepresentation, fraud, or any scenario that would be cause for a mid-term cancellation.

For additional information on policy non-renewals and cancellations, check our online resources at IABforME.com/carrier-resources.

This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice. Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Insurance Agents & Brokers nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/or any other government documents cited in this document.

KIDS & COLLEGE: LOGIC & LANGUAGE AND FORMS & FACTS

By Bill Wilson, CPCU, ARM, AIM, AAM

I am a native of Nashville, TN, but in 1969 my parents drove me to college in Chicago, 500 miles away, dropped me off, and told me they’d see me at Christmas. And, while there were lots of “Be carefuls!” before we temporarily parted ways, I don’t remember one word ever being said about “insurance.” My guess is that, for the typical American family, very little is said, done, or even thought about with regard to “insurance” during the course of planning for

college. Needless to say, this can be problematic.

In my four years in college, I never brought my 1960 pink Rambler to school with me. So, one might think that “car insurance” wasn’t an important issue. It certainly never came up in any conversations with my parents. However, I had a roommate that did have a car, and he left his car keys on his desk along with permission for me to use it,

especially whenever we ran low on “liquid refreshments.” Fortunately, I never had an accident while using his car on an at least weekly basis.

Is it possible that this scenario exists in your personal lines book of business? Almost certainly. Is it likely that most of the auto policies in place for the families you insure exclude any losses arising from vehicles “furnished or available for your regular use” or words to that

effect? I’ll guarantee it. Is that a risk worthy of addressing with your customers? I think so.

Did you know that ISO has a very new personal auto endorsement called Family Member Extended Non-Owned Coverage – Vehicles Furnished Or Available For Regular Use, the PP 43 31 01 23? Your non-ISO carriers may have a similar endorsement. Talk to your underwriters then to your customers with kids in college.

Another issue that often comes up is whether a kid at college needs a renter’s policy or if coverage is extended from the parents’ homeowners policy. Several years ago, someone sent me a link (youtube.com/ watch?v=fSEDEQdJOdk) to a video of a fire at a New York university dormitory/apartment building that was negligently started by a student resident. We’ve all heard news accounts about tragic accidents involving college students and the inevitable lawsuits that follow.

The point I’m getting to, for both auto and non-auto exposures, is the need for adequate liability insurance. How many students insured on a renter’s policy have high liability limits? How many have a renter’s policy and an umbrella policy? How much would it cost for a renter’s policy and a good-sized umbrella policy for a kid at college?

liability coverage for essentially no additional cost other than a slight auto insurance increase for a new garaging location.

One caveat for this approach is that many, if not most, homeowners policies have age limits and full-time enrollment requirements for kids at college in order for coverage to remain in force. ISO, and probably non-ISO carriers, have endorsements that might be indicated, one being the ISO HO 05 27 – Additional Insured – Student Away At School form which overcomes the “fulltime” requirement in the event that a student drops some courses or resides at school over the summer while not taking a full schedule of courses. ISO has other endorsements that might be appropriate as well. Again, talk to your underwriters.

Likewise, talk to your insureds. Let them know that adjustments likely need to be made to their insurance programs to better cover their kids while at college. If you want to dig deeper on this subject, visit the Big “I” Virtual University and search for “college kids.”

CUSTOMER FLYER ON COLLEGE STUDENTS

Rely on IA&B’s library of vetted insurance content to respond to customers’ questions or to educate prospects. Each of the 20 customer flyers – including one on insurance coverage considerations for college students – is professionally designed and ready for customization.

IABforME.com/marketingresources

These customer flyers are an exclusive benefit of IA&B membership. (Please note that you will need your IA&B member login information to access them.)

When my son went to college, we elected to extend the coverage under our own homeowners policy, auto policy, and umbrella policy to him. This gave him $3.5 million in

Bill Wilson, CPCU, ARM, AIM, AAM is the founder and CEO of InsuranceCommentary.com and the author of seven books, including “When Words Collide…Resolving Insurance Coverage and Claims Disputes.” He can be reached at Bill@InsuranceCommentary.com.

An audio version of this article is also available as a podcast

IA&B EDUCATION SCHOLARSHIPS

Apply by Aug. 31 for the next round of insurance education scholarships. On Sept. 15 IA&B will award two individuals with full CIC and CISR designation scholarships, as well as member agencies with scholarships for their staff to attend CIC, CISR, and CE courses.

Scholarships to attend licensing study courses are available throughout the year.

Applications are available at: IABforME.online/scholarships

Questions? Contact IA&B Administrative Assistant Sarah Haas

SarahJ@IABforME.com

800-998-9644, ext. 104

WEBINAR FOR WOMEN

Register today for our upcoming webinar, geared to women insurance professionals. This webinar is part of IA&B’s broader initiative to support women in the industry and follows the sold-out Women’s Conference in March and first webinar for women in June.

The Thing About Women … That Make Such Great Leaders

Presented by Sara Bradshaw Ray (keynote speaker at IA&B’s Women’s Conference)

Thursday, Sept. 14 | 11 AM-Noon

There is no cost to attend this webinar, which is available exclusively to IA&B members. Registration is required.

IABforME.com/ eventregistrations/?eventId=6655

800-998-9644, option 1

Please note: This webinar is designed with women attendees in mind, but it is open to everyone who supports the growth and leadership of women in the independent insurance agent community.

IA&B MEMBER MILESTONE

Congratulations to Weymouth, Swayze & Corroon Insurance on its 90th anniversary. Headquartered in Wilmington, DE, WS&C is a full-service property, casualty, and specialty insurance brokerage. With origins in Wilmington, DE and New York City, WS&C is the result of a 2009 merger between Weymouth & Smith Insurance and Corroon & Associates.

WS&C has remained steadfast in helping clients protect their business and personal assets in 34 states and overseas by offering custom-tailored insurance programs and solutions for all types of risk. Case in point: WS&C once provided coverage for a rare 1 cent stamp that was insured for $6,000,000!

WS&C President Richard Corroon is a proud supporter of IA&B and served on the Board for several years culminating in the position of Delaware Chairman in 2019.

Is your agency celebrating a milestone anniversary? Whether it’s five years or 125 years in business, we want to acknowledge your accomplishment. Email announcements and images to

at KarenR@IABforME.com.

IA&B YOUNG AGENT CONFERENCE

It’s back! Register for IA&B’s Young Agent Conference, Oct. 3-4 at the Cork Factory Hotel in Lancaster, PA. Registration opens August 1.

The conference is devoted to developing up and coming insurance agents into successful leaders. Young agents will connect with peers and mentors during roundtables, breakout sessions, and other networking opportunities.

Hurry! Early bird registration Aug. 1-25

Members $349 Members save $80! Non-Members $429

Prices increase after Aug. 25.

Members $389/Non-Members $469

For more information and registration, go to IABforME.online/YAconference or call 800-998-9644, option 0.

DE WORK COMP EXEMPTION BILL

In late June, Delaware passed legislation to increase the number of allowed workers’ compensation exemptions for LLCs.

Previous law permitted as many as eight executive officers of a corporation and four of an LLC to be exempted from workers’ compensation, reducing the cost of coverage. This legislation increases the number of allowed exemptions from four to eight for LLCs.

The bill was introduced in response to several IA&B members who

IA&B Public Relations Director Karen Robison

experienced situations in which the four-officer limit on exemptions was too low for their policyholders’ needs. Two members of IA&B’s Government Relations Committee, Lee Dotson and Maria Metcalfe, testified in support of the bill.

PA INSURANCE DATA SECURITY ACT

Earlier this summer, Pennsylvania passed the Insurance Data Security Act. The legislation, which largely follows the National Association of Insurance Commissioners model cybersecurity law, will take effect in December.

The Act requires all licensees to report to the Insurance Department within three business days of a cybersecurity event resulting in the unauthorized access, misuse, or disruption of an electronic system containing private consumer information. Licensees above a certain size will also need to conduct an annual risk assessment and implement a data security plan to mitigate any identified cybersecurity risks.

IA&B’s advocacy team successfully lobbied for several changes to the bill, including the addition of exemptions for licensees, the removal of a provision that would have required agents to pay for the Department’s costs of investigating violations, and the reduction of fines for violation by 80%.

If you have questions, contact IA&B Government Affairs Director John Savant at JohnS@IABforME.com or 800-998-9644, ext. 607.

Q& A with LINDSEY PETRILLO

Lindsey Petrillo, MBA, CIC is president of the Eric W. Snyder Insurance Agency, a full-service independent agency in Parkton, MD. Prior to purchasing the agency, she worked as a district sales manager for Erie Insurance Group.

Q. Eric Snyder passed away unexpectedly, which prompted the sale of the Eric W. Snyder Insurance Agency. Why did you decide to take the plunge into agency ownership? And what was the acquisition process like?

A. Honestly, I never saw myself owning an agency. It’s funny what life throws at you though. Leading up to this in 2021, I was at a point in my career where I was really burnt out and looking for a change. Personally, I had been riding a rollercoaster for the two years prior. In 2019, I was diagnosed with a very rare head and neck cancer. Over the next year, while I went through surgeries and radiation therapy, I was also getting my MBA from the University of Maryland. As that chapter came to a close and I stepped onto the road toward recovery, COVID-19 hit. Needless to say, when 2021 rolled around I was admittedly a little lost, but knew I needed to make a change.

Eric’s passing was devastating. He was a close friend and mentor I had worked with since I moved to Maryland in 2016 to work for Erie. Little did Eric know that prior to his death, I was debating the idea of approaching him about perpetuating his agency. Unfortunately, we never got to have that conversation. A few months later, when the family decided to sell the agency and asked for my help in finding a buyer, I felt compelled to step up. This was the opportunity I had been looking for, and the opportunity was made so much sweeter when I could do it in honor of a dear friend.

The acquisition process was a beast. Going about acquiring an agency without the prior owner makes it challenging. I was lucky to have a solid team around me to support me throughout the process. I also had some great agent friends who let me vent on the hard days or were there cheering me on, on the good ones. Having a strong support system – both professionally and personally – is vital for anyone who is going through the acquisition process.

Q. What lessons have you learned from this experience?

A. I think the biggest lesson I’ve learned from this experience is to have more patience … with the process, with myself, with the business, etc. It’s something I still have to remind myself of regularly. I have friends who have often told me the only way to eat an elephant is one bite at a time. My situation was a little more unique because Eric didn’t retire, he passed. I had to take the process and the transition one day at a time. There were things I had to learn and the key person to learn them from wasn’t here. I have had to lean on others to help me get up to speed. It’s been a very humbling experience.

Another lesson has been accepting that you’re not going to please everyone. One of our biggest hurdles has been addressing Eric’s passing with customers while also introducing new ownership and team members. Again, we are in a unique situation, and there really is no “right” way to handle it. Some customers have taken his death very personally, and we know change is hard. All I can do is be confident and comfortable in the way I have approached it and that I did so with Eric’s family, my team, and the business in mind.

Q. You were a successful district sales manager before switching sides of the desk. What would be helpful for other independent agents to know about their carriers, reps, and the support they offer?

A. It’s important to remember that we are all on the same team. Success for an agent means success for the DSM, branch, and carrier. There are times where tough conversations are had or decisions are made by a carrier that aren’t agreeable to everyone, but know they are trying to do their best to advocate for agents and help where they can.

Another thing, be kind! Sometimes we can forget that DSMs and branch managers have a lot of plates in the air just as agency owners do. We are all busy and stressed and are trying our hardest. When days are hard or we disagree, it doesn’t hurt to remember to be kind.

Q. What’s your favorite thing about working in the insurance industry?

A. I think my favorite thing is operating a woman-owned business. I recently attended the Women’s Conference IA&B held in March. It was great to network with other women in the industry, but what really made the day special was meeting a few young women who currently work for another independent agency. When they found out I owned my agency, they told me how inspiring it was, and we proceeded to have a great conversation with them asking me a ton of questions about my experience. It’s only been 17 months of owning the agency, but a long-term goal of mine is to focus on the female customer – whether she be a homeowner, or a business owner, or both. I see it as an opportunity to empower women to learn more about their insurance and why it’s important.

Q. Having worked on the carrier and the agency side gives you a unique perspective on our industry. What do you see as the independent agency channel’s biggest challenge?

A. Currently, I think the hard market we are facing right now is the biggest challenge. I’ve heard others talk about it saying it’s the hardest market many will ever face in our careers. When it comes to rates and customers shopping around, as a district manager, we look at it very factually, and everything is data driven. We get to have the bigger conversations with multiple departments to understand what our experience is and what’s actually driving rates. On the other side, as an agent, it’s a much harder conversation to have. Every dollar added to someone’s policy is a pain point for a lot of customers right now.

I think there is some sharing of perspectives between company and agent that could help both sides.

Looking ahead, I think many can agree our biggest challenge is recruiting and retaining quality employees. I have explored various ways to recruit talent and have worked with consultants in the fields of HR and recruiting to hone my approach. When it comes to retaining staff, I think it’s abundantly important to show gratitude toward and appreciate your employees. Providing structure, a comfortable work environment, and stability (in the form of quality pay, incentives, and benefits) are also vital. The market has changed, and we as agents must adapt and be willing to invest in our employees so they will want to stick with us for the long term.

Q. When you’re not working, how do you spend your time?

A. Through my personal experiences, I have learned how important it is to take time for yourself and to prioritize self-care (especially when you’re a business owner). When I’m not at the office, I enjoy spending time with my friends and boyfriend exploring Baltimore city or traveling. I am an avid reader, so you can often find me completely engrossed in the next book on my list. I also love being active, whether it’s hiking, doing Pilates, or a spinning class.

OUR FEATURED PLATINUM PARTNER

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With customized sales and marketing tools built for you, Plymouth Rock is committed to helping you achieve profitable growth in your business. You’ll have access to senior leadership, plus a dedicated team with regional expertise. And our competitive compensation plan will reward your success along the way.

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HISTORY & MISSION

Since 1983, Plymouth Rock® has operated on a simple promise: our agents and customers can expect the assurance of good people. For policyholders, that means always having someone to talk to — to help answer questions and get life back to normal. For agents, that means a partner committed to working alongside you and your staff so that we can grow together towards the same goals.

Plymouth Rock is committed to providing our agents and customers with superior service, innovative products, unique benefits and competitive pricing. As a leading personal lines writer in the Northeast, Plymouth Rock wants to be your preferred full package writer in Pennsylvania.

• Personal Auto – a variety of coverages and discounts, a simple quoting process, and a service team you can count on.

• Home, Condo & Renters – quote in seconds and bind in minutes with our industry-leading @Home product, offering innovative coverages that today’s homeowners seek out.

• Umbrella – simple cross-sell from an auto or home quote.

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Ease of Doing Business

Our investment in technology and digital innovation ensure fast and easy quoting for our agents.

Insurance Agents & Brokers proudly recognizes Plymouth Rock Assurance as one of its Platinum Partners. IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

IABforME.com/Partners2020

Exceptional Service

Our commitment to service is focused on doing business the way our policyholders prefer – directly with our agents, over the phone with a licensed service representative, online using our enhanced eService platform, and now, via text message with a live customer solutions team member able to handle policy questions in real-time.

Claims Made Easy

Our reliable Claims service puts drivers back on the road quickly and without hassle. Offerings include:

• Text Message Capability – policyholders can text with a Claims team member to make communication quick and easy.

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• With the CarPics® photo appraisal tool policyholders can send us photos of their vehicle right from their phone.

Learn More

For more information about Plymouth Rock or to inquire about appointment opportunities in Pennsylvania, send an email to MarketingServices@plymouthrock.com.

DISCLAIMER: Plymouth Rock® and Plymouth Rock Assurance® are brand names and service marks used by separate underwriting, managed insurance, and management companies that offer property and casualty insurance in multiple states pursuant to licensing arrangements. Each underwriting and managed insurance company is a separate legal entity that is financially responsible only for its own insurance products.

The Important Role of Due Diligence in M&A Deals

By Jennifer Martin, CPA, CFE, of MarshBerry

The term “due diligence” is synonymous with words like: assessment, investigation, scrutiny, and audit. It also conjures up descriptors such as: slow, laborious, or painstaking. Because of this, the importance of the due diligence process in merger and acquisition (M&A) deals may be easily dismissed or perhaps rushed – defeating its true value and purpose: to thoroughly examine the crucial elements of a transaction to the benefit of all parties. And a “thorough examination” of a potential M&A deal could mean the difference between tremendous success or disastrous failure of a partnership.

Reasons Some Firms May Forego Due Diligence

Because of the assumption that the due diligence step will slow down the process of a deal, some firms may gloss over or rush this step because of the timing and/or cost. There are also some assumptions that experienced owners know their business or the industry so well, there is no need for outside consultation or expertise to perform due diligence. But having an experienced third-party due diligence review is more about having someone who understands the steps in the process, understands the insurance industry, and can provide unbiased assessments that both parties can trust, ultimately to help everyone make informed decisions.

Due Diligence is Valuable to Both the Buyer and the Seller

As tiring and taxing as the process may seem, having both buyer and seller really dig into the details of the transaction can benefit both parties. Unlike the early courting phase of partnerships, which can feel like speed dating, the due diligence phase allows each party to slow down and really assess how the moving parts of both businesses will work together.

For many buyers, they have done this before and recognize due diligence as a critical step in the M&A process. For them, it’s about understanding all of the potential risks, opportunities, and business components of their potential investment or acquisition. The more informed a buyer is, the better the relationship will be through integration post transaction.

For most sellers, this may be the first time (or only time) they are involved in an M&A deal and might find the due diligence process inconvenient and unnecessary. But sellers should understand that due diligence provides them an opportunity to address any concerns, questions, or potential risks identified during the review. In fact, a seller should consider conducting their own pre-due diligence assessment in order to be prepared for questions from the buyer.

Getting Started

Once a letter of intent is signed with a target to exclusively negotiate on an acquisition, confirmatory due diligence begins. This phase is often driven by the buyer and/or the buyer’s advisors. Some buyers perform due diligence in-house, but most buyers involve an outside advisor to represent their interest, and it is often a requirement of the buyer’s capital provider. However, it is just as important for the seller to confirm their understanding of the buyer during this phase. Afterall, the end goal is a successful partnership with no buyer or seller remorse. Like dating – there will be many twists and turns, but most can be anticipated and/or avoided with proper planning. And properly planned due diligence can help prevent deal fatigue by both parties.

Risk Assessment and Potential Pitfalls

Performing a risk assessment at the onset of due diligence can save time down the road, help identify what matters most, minimize the unexpected, and allow for a more efficient process. Most due diligence assessments start by looking at the “why” behind doing this transaction in the first place. What are the goals and objectives of this partnership? How will everyone define and measure success for this deal? Once these are clearly identified – next, it’s important to think about and document the potential pitfalls that could undermine the “why” of doing the deal.

Here are some top pitfalls to watch for:

● Culture clashes. Integrating people from different corporate cultures can be one of the biggest challenges and potential pitfalls to a successful deal. Healthy work cultures, team chemistry, and individual

personalities of senior-level leaders aren’t identified on financial spreadsheets. These are qualities that need to be examined and evaluated closely and are proven to impact M&A deal success rates.1

● HR issues. Every organization handles staffing differently – ranging from the classification of workers (i.e., full time, part time, independent contractor) to salary structures for sales personnel to restrictive covenants. It’s important to understand how a partnership may impact those existing employment structures.

● Lack of strategic alignment. M&A can be a powerful tool in helping both parties achieve their strategic goals. However, it is important to ensure that both parties are aligned on their vision and objectives. Without a clear strategic fit, the deal may not deliver the benefits as anticipated by both parties.

● Pro-forma disagreements. Pro forma EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) is often a primary driver of valuation in most deals. Therefore, sellers are motivated to be aggressive in their pro forma assumptions, and buyers are motivated to take a more conservative approach. It is important for both parties to understand the methodology utilized in building the pro forma and agree on how any synergies or shared costs will be treated. Not only is this important for the initial valuation, but also for earnout purposes if contingent payments are part of the deal structure.

Resolving Issues

As items are identified during the due diligence process, whether positive or negative, keep a scorecard and compare with the initial risk assessment. Keep track

of how issues are handled as they arise. Afterall, in any partnership it is not a matter of “if” issues will arise but rather “when” they will arise. Take note on how collaborative or not your potential partner is being in determining an agreeable solution. It is better to gain this level of understanding during the engagement phase rather than after a completed transaction.

Every deal carries a certain amount of uncertainty and risk. However, properly planned and executed due diligence can help minimize the risk for potential issues post transaction and can help keep emotions in-check. Documenting, quantifying, and analyzing the risks during diligence can help make buyers and sellers more comfortable on the day they are signing or making that wire transfer.

If you would like to learn more about how to navigate the complexities of partnership deal negotiations, email or call Jen Martin, Vice President, MarshBerry, at Jen.Martin@ MarshBerry.com or 440-287-6790.

Investment banking services offered through MarshBerry Capital, LLC, Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, LLC, 28601 Chagrin Blvd, Suite 400, Woodmere, OH 44122 (440) 354-3230

1 https://www.mckinsey.com/capabilities/m-and-a/ourinsights/the-flip-side-of-large-m-and-a-deals

The due diligence phase allows each party to slow down and really assess how the moving parts of both businesses will work together. - Jen Martin

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Get to Know …

Cheryl Shiffer, CPCU, CISR Elite Insurance Agency

Territory Manager

Years with IA&B: 8

Role at IA&B: Territory manager servicing the insurance needs of independent agencies throughout Central and Western Pennsylvania.

Best part of your job:

The customer contact!

What did you do before working at IA&B?

I spent 40 years working in seven different agencies in the Harrisburg area. Yes, I remember expiration cards.

What keeps you busy outside of work?

Spending time with my granddaughter, Nina, keeping in touch with prior coworkers, and dreaming of being on a beach – 85 degrees with a gentle breeze….

You can reach Cheryl at: 717-918-9201

CherylS@IABforME.com

October 3-4, 2023

Cork Factory | Lancaster, PA

REGISTRATION OPEN AUGUST 1

Call 800-998-9644, option 0

IABforME.online/YAconference

Highlights

▲ Women’s Breakfast

▲ Young Agent Award Lunch & Panel

▲ Happy Hour, Dinner & Networking

Topics

▲ Keynote Address & Workshop with Jimmy Page

▲ Thriving in the Hard Market with Bobbie Fernandez

▲ Prospecting with Greg Orth

▲ Niche Navigator with Bobbie Fernandez

▲ Chat GPT with Jason Walker

IA&B works on your behalf to ensure that state legislators and regulators understand the issues affecting agents.

YOUR FINANCIAL SUPPORT AMPLIFIES YOUR MESSAGE.

Please consider contributing. More information at IABforME.com/political_advocacy

IA&B Members: Shopping E&O?

▲ We have the plans that agencies need.

For personalized service, CONTACT KEVIN HORD, CIC, CPCU, ACLS, MBA 800-998-9644, ext. 209

KevinH@IABforME.com

IABforME.online/insurance

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WELCOME NEW MEMBERS

MISSION STATEMENT

To serve as a driving force to champion independent agency success by educating, consulting, advocating, and fostering community in Pennsylvania, Maryland, Delaware, and beyond.

Sales Account Executive: Laura Gaenzle | 717-430-2351 laura.gaenzle@theygsgroup.com