A Deep Dive on Insurance Brokerage M&A

**Episode Summary** During this episode of “The Practice Manual,” host Rob Chaplin is joined by colleagues George Gray, Anika Goodfellow and Usman Sawar to examine the ins and outs of brokerage M&A. The team covers a range of topics, including how acquirors of brokerage businesses must tailor their transaction documentation to protect value, why a standardized approach to deal documents can be a costly mistake and how the interplay between earn-outs, management reinvestment, leaver provisions and restrictive covenants is critical to aligning interests post-acquisition. The panel also explores the FCA change-in-control process and multijurisdictional regulatory approvals, among other key topics. **Key Points** **Why brokerages are different:** The primary assets in a brokerage are client relationships, key producers and regulatory permissions rather than tangible property or proprietary technology. Revenue is relationship-dependent and largely intangible, which means the legal documentation must work hard to protect what the buyer has actually paid for. Sponsors and acquirors need to resist the instinct to use standardized documents and instead tailor the transaction carefully to preserve value. **Earn-outs and consideration structuring:** Earn-outs are a common feature of brokerage M&A, particularly on bolt-on acquisitions and platform establishment transactions, where they serve to defer consideration until revenue sustainability can be verified and to keep sellers economically incentivized post-acquisition. On larger, more institutionalized transactions, earn-outs are less common, as sellers — and any external private capital in the structure — tend to push for greater upfront certainty of value. **Reinvestment and management incentivization:** The obligation for sellers to reinvest in the go-forward business is becoming increasingly central to brokerage transactions. Reinvestment ensures alignment between seller and buyer interests post-closing, with key personnel sharing both upside and downside. **Gap controls and interim period management:** Gap controls in brokerage M&A require a careful balance between protecting the buyer’s position and allowing the target to continue operating — and, critically, continuing its own acquisitive business model. Restrictions around changes to key personnel, remuneration structures, insurer relationships and key contracts should be calibrated to ensure the business delivered at completion has moved forward during the gap period. **Execution risk and shareholder dynamics:** Founder-owned brokerages often have large, fragmented shareholder bases with differing tax positions, views on value and levels of transaction experience. Without early planning — including establishing a shareholder representative structure, mapping drag-along and tag-along mechanics and implementing a disciplined power-of-attorney process — deal friction can cause economic terms to reopen and bidder tension to collapse. **Regulatory approvals and FCA change-in-control:** The FCA’s change-in-control process is typically the dominant timetable driver on U.K. brokerage transactions, with a statutory assessment period of 60 working days that can be extended through clock-stopping and further information requests. Where deals require filings across multiple jurisdictions, each regulator will have different requirements, tests and documentation expectations, and long-stop dates must be calibrated accordingly. ## **Connect and Learn More** ☑️ Robert Chaplin | LinkedIn ☑️ George Gray | LinkedIn ☑️ Usman Sawar | LinkedIn ☑️ Anika Goodfellow | LinkedIn ☑️ Skadden | LinkedIn | X | Facebook ☑️ Subscribe Apple Podcasts | Spotify | YouTube *“The Practice Manual" is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.*