Restructuring for the future
Agency Banking
The background:
Currently, about 41 percent of U.S. companies are owned by baby boomers who are looking to retire in the coming years and it’s expected that in the next two decades, seven out of ten businesses will transfer ownership. In the insurance industry, mergers are an ongoing process for agencies, requiring a steady foundation to act on opportunity.
Main Street Swimmer Insurance is one of the nation’s largest independent agencies and a Keystone member.
The challenge:
In 2019, Main Street Insurance was early in the negotiation process, acquiring Swimmer, a Charlotte-based insurance agency.
“We've never had to use outside financing on any of the opportunities we've done in the past. We typically work those transactions as either partner redemption agreements that were financed internally or at the request of the partners that were giving up their ownership. As we continued with negotiation, there were several points at which outside financing became more lucrative,” says Charles “Tripp” Z. Flack III, CIC, President & CEO, Main Street Swimmer Insurance.
Main Street Insurance had a unique stock shareholders agreement in place that required employees and partners to give up their shares at age 67. Prior to Westfield Bank, the accompanying transactions were also done internally. The merger with Swimmer required additional expertise to handle the acquired partial liquidation and shares.
Our solution:
“Westfield Bank gave me a portfolio box to help us sort through what might be most effective for us to structure the deal and provide financing. Because of their unique understanding of insurance agencies there were more beneficial options that met our needs,” says Flack.
Along with facilitating the merger of Swimmer, we began financing stockholder redemptions, future purchases, acquisitions, and mergers on behalf of Main Street Swimmer Insurance’s entire operations during the process.
“Purchasing shareholders can utilize Westfield Bank to get into the company without having company finance. That cleans up our balance sheet,” says Flack. “Moving forward, it gives the same opportunity to younger shareholders once they reach the opportunity to buy. Overall, it expanded our opportunities and our knowledge.”
Empower your agency with working capital as you achieve new milestones. Working with you throughout your agency’s acquisition, merger, or perpetuation, our team of dedicated bankers is here to keep you moving forward.
