In February, Folkestone’s Independent Insurance Services was purchased by a local managing general agency. Outgoing business owner Ray Johnson offers a personal account of his exit strategy and explains why it was important to sell to a company with similar values
Did you always have a particular strategy in mind when it came to succession and selling on the business?
I’m 55 years old now and when I was 19 I wanted to retire at 55. And while I’m not retiring per se, I am leaving the insurance broking sector. About three years ago I thought it would be suitable to start thinking and preparing on the basis that it would probably only take a year. I spoke to a fellow broker who had sold at that time and he said, ‘Ray it will take you two-and-a-half to three years’. And sure enough it did work out to be around that amount of time from the initial concept through to completion.
Why should brokers think about succession planning, even if they may not be close to retirement?
In general, it is good contingency planning in case something changes, or even the sector changes. It’s a good idea to be prepared. There are a lot of owner businesses still out there. That generation are not getting any younger and in the future there could potentially be health issues, which is a common problem. Perhaps finance or family issues, or just a desire to move away from the sector or change direction. You never know what is around the corner so it’s a good idea to prepare.
When you started thinking about your exit strategy what were the options available to you?
One was a management buy-out, and that was offered but nothing happened, which was fair enough, but we are quite a micro business really. The other one would be to set up an arrangement where you just work within the business and have a part-share within it, or full sale of the business. My clear objective was to sell, to draw that line.
What was your criteria in terms of looking for a suitable buyer?
I had a profile of what I wanted to achieve. I wanted it to be a broker who was going to be proactive and look after the clients. So it was critical to make sure that was a good fit. I wanted to make sure that the staff were looked after and catered for long term, and that there was continuity. Then there was obviously the deal itself and the exit process for me. I was keen to stay on the usual two-year period, however we agreed an early one-year, which was a good bonus for me. I was also keen to secure the premises, where the customers could still come in to see us. The staff enjoy working in the environment we have here. It’s very open, very light and airy, it’s in a good position, so that was important as well.
Another thing that was quite important to me, which is probably a bit unusual in most businesses, was to have assurance of the continuation of the community work that we do, as we are a community broker. So the company which purchased agreed to continue to support a couple of charity races here in Folkestone, along with a couple of charities. So it’s quite good that a lot of the ethos and the way that we work will continue.
How did the deal with IIS South East come about?
The buyer is a local company and a property owner specialist and so now it has the separate broker, which is an independent arm. Once it expressed an interest it all happened quite quickly. Back in August last year we had the meeting and then it was all sorted within around six months. And a lot of that is down to the fact that it is local, there are a lot of synergies and it has a similar ethos.
I was also concerned to know who was going to head the business after I had left. And when they came back with the offer they told me it was Martin Bridges, who was at the time working with Biba and has more than 25 years’ insurance broking experience. I knew Martin because we’d served on the CII council together and so that was really good news. So Martin’s on board and he’s a director of the new company so it’s another good fit.
Was it important to you that the firm remained independent?
Yes, because we didn’t want to be in a situation where all the risk just goes into five carriers or into schemes and then it all gets lost. Some brokers are quite happy to go into a restricted market, but ultimately we’ve served our clients better, and our renewal retention is very high, by having not gone down that route. Where we’re dealing with commercial clients in particular, offering them the packages that we do and the solutions to their insurance programme, we’re finding that we have even more traction
No comments yet