085: Decrypting the M&A Market with David Leslie

Are you considering putting your business on the market but unsure about what to do? Are you concerned about how selling your business might affect customer relationships, your employees, and the brand itself?

In this week’s episode, we’re thrilled to be speaking with David Leslie, Founder and Managing Director of Leslie James Acquisitions. In conversation with Boston Tullis’ Sarah Myerscough, he grants listeners a deep dive into the M&A (mergers and acquisitions) insurance market, focusing on what makes vendor businesses attractive to acquirers, and the intricacies of the valuations process. If you’re thinking about selling your business, listen now to find out how!

 

Quote of the Episode

“People are very important, particularly client-facing people within a business, because to disrupt those relationships between those people and the clients can have an adverse effect. Equally, brand is very important. Most acquirers recognised the importance of brand. Consequently, most acquirers will not seek to change the name and branding of an acquisition, certainly not for a good number of years.”

While a business acquisition can superficially seem to be a somewhat cutthroat affair, in the episode, David Leslie demystifies this notion, by emphasising that acquirers ultimately do not wish to disrupt the relationships between vendor businesses and their customers. He emphasises that in gearing up to a sale, vendors should have succession management in place, so that following the acquisition, the new owners will enable the business to continue operating smoothly. Furthermore, due to the importance of your business’ brand to the sale, it must be clear to the acquirer that this reputation, and the core values underpinning it, will remain unchanged through the transition of ownership. In a previous podcast, linked below, Tim Johnson emphasised that the community element of vendors is crucial to their valuation.

 

Key Takeaways

Acquirers are not seeking to fundamentally uproot the businesses they purchase, but to capitalise on the reputation that they have already established through the quality of their brand and their people. While in some situations, the acquirer will insert its own people into the business, a concern for many vendors, David notes that this tends to be from an oversight standpoint.

The brand value of a vendor may seem difficult to quantify. David notes that it is measured by its overall image, the impression of its professionalism, how well-known it is for quality customer service, will all increase the appetite of an acquirer. Therefore, you’d like to sell either soon or further down the line, building up your brand should be a priority.

Ultimately, when valuing a vendor, the first thing on the acquirer’s mind is a business’ EBIT DA and its income multiples. A lot of false figures have been thrown around regarding this topic. For a predominantly commercial broking business, David suggests that an acquirer is generally looking at income multiples between roughly two and two and a half times. However, David has seen businesses sold for less than those multiples, and others that have been sold for more.

Fundamentally a valuation boils down to acquirer appetite. The more interest a business has, the more it will sell for, in spite of EBIT DA. To get sufficient interest, its EBIT DA and income multiples will likely be very good, but there are other variables at stake – its brand and people. As such, David asserts that the reputation of a vendor is crucial, perhaps even above all else.

 

Best Moments/Key Quotes

“The value of the brand inherently relates to its image, its quality, its professionalism, all of these sorts of things. And the more well-known the brand is for quality, [good] customer service, and so on, the appetite of an acquirer will increase. And inevitably, increased appetite would lead to an increase in valuation.”

‘[As an acquirer], you are generally, for a predominantly commercial broking business, looking at income multiples somewhere between roughly two and two-and-a-half times.’

‘It’s very much a seller’s market, but it’s down to acquirers’ appetite.’

“For vendors, there are two types of sales essentially, one is a share purchase, or shared sale, where the company and its shares are being bought. So, the shareholders are selling their shares to the acquirer. The other is an asset often referred to as a book sale, where the vendor is essentially selling their book of business, possibly also, the premises, leasehold or freehold plus their staff.”

 

Resources

The Insurance Broker Podcast – Mergers and Acquisitions with Tim Johnson

Leslie James Acquisitions - https://lesliejamesacquisitions.com/

 

About the Guest

David Leslie is the Founder and Managing Director of Leslie James Acquisitions, an M&A mergers and acquisitions business operating solely within the insurance sector. He has 41 years’ experience in the sector, having worked for several years as a registered broker.

David Leslie’s LinkedIn Profile: https://www.linkedin.com/in/david-leslie-30696a24/

 

About the Host

Sarah Myerscough is the Sales and Marketing Director of Boston Tullis Group. The founder of The Insurance Brokers Podcast, she brings a wealth of marketing experience and a fresh perspective on marketing in the insurance sector. Boston Tullis works with insurance brokers to offer solutions to business development ceilings, particularly in the rapidly developing fields of video marketing and thought leadership.

Website: https://bostontullis.co.uk/ 

Evaluation Link: https://s.bostontullis.co.uk/s/podcastevaluation