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... price. Sellers also hear the legends of other sellers getting high prices, so they become more willing to hold out for the big bucks. Herein lies the self-fulfilling prophecy. Because of the marketplace factor, agency value increased significantly between 1999 and 2004. As business appraisers, our firm has noticed an overall increase in value from about 10% to 25% during this period. Profitable, well-run firms posted increases of 20% to 35% . So will the good times keep on rolling? The trend is for the rate ... results from a self-fulfilling prophecy. &# 160 During the past several years, there have been some notable acquisitions that seemed to push the agency value envelope. In some cases, banks were willing to pay top dollar for their first acquisition of a large, well-run firm. In others, publicly traded firms were able to exploit their high price-to-earnings ratios to offer a high price to the seller. In reality, many of these deals weren't quite as sweet as the word on the street. Large cash down payments provided a great ... AGENCY VALUE Agency value is based on profitability and risk. For the most part, profitability has been flat during the past four years or so. Although the hard market added some nice top-line growth, such expenses as staff compensation, employee benefits, automation, and Errors & Omissions insurance all increased, having a neutralizing effect on revenue growth. Because the first part of value — profitability — hasn't changed much, this would not indicate an increase in value. Risk — the second part of agency value — hasn't changed when looking ...

...n firm. In others, publicly traded firms were able to exploit their high price...(707) 936-6565 or by e-mail at info@oakandassociates.com. Reproduced by permis...

...igh-valued homes had not had an appraisal, or even an inspection, in years an...unity to increase income per account, and subjecting your agency to a loss of dollars, E&O coverage, and public opinion.

...ompanies on time? Has it incurred errors and omissions claims due to sloppy procedu...e of the initial questions that agents and bankers must ask and answer before even considering a re...

... of ways. There can be a formula, such as 1 times or 1.25 times commissions. Such formulas have a way of getting out of date quickly, so they should be used with caution if the transaction is not to close soon. There can be an appraisal by a specialty insurance appraiser. These appraisals look at the bottom line rather than the gross commissions of the agency, and consider how the agency compares to others in the industry. They are aware of comparable sales. There can be a combined approach, under ... shareholder, but (c ) generates no cash for the acquired shareholder until the stock is sold (normally on an exchange) . Mergers are normally used by large brokerages which are expanding by acquiring local agencies. They are used much less frequently in acquisitions by smaller firms. There are several types of tax deferred reorganizations involving two or more corporations, including statutory mergers, stock for stock exchanges, and stock for asset exchanges. IRC 368. If the agency game plan is to grow through mergers, or to be acquired down ... little down as possible. He typically wants to be able to depreciate as many of the assets he acquires over as short a time as possible, to reduce the tax cost of the acquisition. He also wants to avoid liabilities of the acquired business, such as errors & omissions exposure. The seller may wish to defer tax from the sale. He normally wants as much of a down payment as possible. He typically would prefer to have capital gains treatment for the gain from the sale of the business, rather than ordinary ...

... to close soon. There can be an appraisal by a specialty insurance appraiser. These appraisals look at the bottom line rather tha...t of a decedent, suffering both estate and income tax (with