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For anyone looking to purchase a BOB, here is a great informational piece I came across. Hope this helps:
Individual health is a bit of an unknown at this time with ACA on the horizon. However, as in many transactions, deals can be closed with the right structure that provides a win/win for both Buyer and Seller. A 100% individual health book would definitely command a lower cash up front structure, then say a small group and definitely large group health book of business only or established group-focused company. From selling other health related books of businesses, there are buyers all day long that will pay on a retention basis, anywhere from 1-2x the gross commissions, depending on the aggressiveness of the payout structure...[view less]
I think without any details of the volume of commissions we're talking about, I think realistically if you called $X your gross commissions, some kind of structure that approximates the following would be a reasonable scenario where you would attract legitimate buyers:
Scenario A: 0.25x in cash at close. 1.75x paid out over a 4-5 year period. 2x secured over the course of the payoff. Ideally for the Buyer's protection there would be some form of agreed upon look-back period after Obamacare was implemented fully. Say for instance with the health exchanges if 30% of the book migrated (somehow - very doubtful if you ask me) then there would be a reduction in the payout to 1.4x since 0.3x disappeared on a 2x multiplier.
Scenario B: Could take something of the effect of 0.75x at close, and another 0.5x paid out in a balloon 1 year from closing. This way 2014 gets some time to develop, but yet the Buyer pays a fair price, with a claw-back likely going against the balloon if the same exchange type client loss occurred.
So in a vacuum it's tough to tell you without many other details needed to put a real valuation on any book of business or insurance agency. But I would say those would be very imminent payout structures that I would be comfortable presenting to my Buyer pool and I'd be confident we'd both be paid in a reasonable period of time with a fair market price point. That's the goal in every deal of course!
Cheers,
-Rick Carlson of Ace Business Brokers.
Individual health is a bit of an unknown at this time with ACA on the horizon. However, as in many transactions, deals can be closed with the right structure that provides a win/win for both Buyer and Seller. A 100% individual health book would definitely command a lower cash up front structure, then say a small group and definitely large group health book of business only or established group-focused company. From selling other health related books of businesses, there are buyers all day long that will pay on a retention basis, anywhere from 1-2x the gross commissions, depending on the aggressiveness of the payout structure...[view less]
I think without any details of the volume of commissions we're talking about, I think realistically if you called $X your gross commissions, some kind of structure that approximates the following would be a reasonable scenario where you would attract legitimate buyers:
Scenario A: 0.25x in cash at close. 1.75x paid out over a 4-5 year period. 2x secured over the course of the payoff. Ideally for the Buyer's protection there would be some form of agreed upon look-back period after Obamacare was implemented fully. Say for instance with the health exchanges if 30% of the book migrated (somehow - very doubtful if you ask me) then there would be a reduction in the payout to 1.4x since 0.3x disappeared on a 2x multiplier.
Scenario B: Could take something of the effect of 0.75x at close, and another 0.5x paid out in a balloon 1 year from closing. This way 2014 gets some time to develop, but yet the Buyer pays a fair price, with a claw-back likely going against the balloon if the same exchange type client loss occurred.
So in a vacuum it's tough to tell you without many other details needed to put a real valuation on any book of business or insurance agency. But I would say those would be very imminent payout structures that I would be comfortable presenting to my Buyer pool and I'd be confident we'd both be paid in a reasonable period of time with a fair market price point. That's the goal in every deal of course!
Cheers,
-Rick Carlson of Ace Business Brokers.
