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If you want to sell your brokerage and get the possible price, it may be stating the obvious but you need to get your “house” in order. Here we set out our Top Tips on issues you need to be thinking about to ready your company for sale.

Top Tips
  1. Compliance – Don’t Forget the FCA -If your company is authorised and regulated, and invariably it will be, don’t forget the regulator, as the transaction will require the approval of the FCA to the change of control. This is down to the buyer to obtain and it can take up to 60 days (although often it happens much quicker). The FCA may take the opportunity to seek some improvement in governance, outcomes or systems and controls as a condition of their consent. Ensuring that you are fully compliant beforehand will speed the process.
  2. Due Diligence -Putting to one side, the main legal documents which invariably are the share purchase contract, tax covenant, the disclosure letter, the disclosure bundle, the employment contracts, the board minutes etc., the transaction is likely to go smoothly (or at least have less hiccups), if the due diligence process is well thought out and planned.
    Setting up a data room is the key. It enables you to control the process, and it means you can easily and securely upload documents into it, which in turn enables potential buyers or their advisers to view them on a timely basis.
    If you have some months to prepare your company for sale you have time to make sure your data room has all the relevant documentation a purchaser would want to see. If you have inadequate documentation at best you delay the deal as the Buyer’s lawyer asks to see the documents you should have put in there at the start. At worst you may kill the whole deal. The Buyer is concerned that you are holding things back and can “walk”. You need good lawyers and accountants who know you and know the special issues and problems which arise in selling an insurance brokerage. On a sale you must make sure your team can deal with compliance issues and specific contractual issues peculiar to insurance contracts
  3. Consider Common Problem Issues -From our experience some of the sorts of issues which can cause problems before completion are:
    • Credit write backs – you need to carefully consider these before taking these monies into your P&L. Did you get the insurer(s) to consent, has your auditor signed the amounts off and was board approval obtained? A buyer will typically want these issues resolved as cleanly as possible.
    • Revenue recognition – how do you recognise income? Inflating your financial results may put off potential buyers.
    • Indemnity protection – your advisers should advise you against giving wide indemnities – they should be specific and linked to any issue identified.
    • Will the shareholders be employed by the new owners – carefully constructed service agreements will be required.
    • Accurate and up to date claims and complaints information will need to be readily available.
    • Change of control issues – the buyer will want to be assured that after he has completed the purchase the carriers will still be around. Are your TOBAs signed and up to date?
    • Client monies – always a thorny issue if you hold client money rather than on a risk transfer basis.
    Just a few key issues to think about. If you think about these and ideally deal with them in the actual Heads of Terms you reduce the chance of these issues being brought up by the buyers’ lawyers and potentially delaying or even derailing your sale.

Getting your business ready for sale is difficult.

If you need any advice on this or supply want to discuss what you should do with an experienced corporate insurance lawyer please call David Coupeon 203 553 4884 or Ian D’Castroon 0203 553 4882.

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Birketts and EC3 Legal announce merger

David Coupe, Senior Partner at EC3 Legal, said of the union: “The focus of EC3 Legal has always been on serving our clients' businesses. Following the merger with Birketts, I am confident that our clients will continue to be the biggest beneficiaries, as the two practices will be able to expand and develop the range of services on offer to new and existing clients.”


Posted 1 May 2020

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