We anticipate that many companies within the industry this year will seek to reduce their competition and improve their market positions by acquiring title insurance agencies. During a title insurance acquisition, a company’s representatives need to know how to prepare properly to reduce costly errors, delays and financial and legal problems. A title insurance acquisition is an extensive, labor-intensive process that also requires a massive time investment. This quick guide covers the steps a company should take for a successful outcome:
1. Hire a Team of Multidisciplinary Advisors
A company should hire a legal team that has extensive experience with all areas of title insurance acquisition to guarantee proper handling of legal requirements. They should also invest in an experienced financial advisor who can provide critical transactional advice, review financial details and help with preparing various information releases. A financial advisor might even help with locating potential buyers and assisting with negotiations. It’s important to have part of the team strictly dedicated to negotiations. Beyond legal and financial advisors, they might include the Board of Directors or the CEO.
2. Attract More Than One Interested Party
Although luck can play a role in any sale, planning more often than not leads to the best deal. A company should use contacts within their team to help them find interested parties. They should offer competitive bidding, which attracts multiple interested parties by promoting the idea that the company is worth a fight. When only one bidder exists and that party knows this fact, a company loses any leverage they might have had in a more competitive, multiple-bidder environment.
3. Present All Information in Accessible Formats
The team can break down all information-release options. They should promote slide decks as one format to provide prospective buyers details about the company. Think of a deck as a story summary of the company’s business website that focuses primarily on how the company offers market opportunities. Once interest exists, the company can create additional decks that focus on specific areas like financials and products. An online data room is another option that goes even further. It’s a secure and confidential resource for all documents pertaining to the transaction, especially documents like financial statements that highlight the company’s worth.
4. Require Legal Protections from All Parties
To prevent competitors and criminals from using confidential and proprietary information to their advantage, a company should invest in legal and security protections and require compliance. They should set up widescale tracking and reporting of interactions with the data room and document. They should also demand that all parties sign a Non-Disclosure Agreement that details every possible scenario related to the use of shared information.
It’s obvious that all these processes take up business hours, especially when company representatives must build their team, prepare error-free documents and set up a data room and all relevant security. They must also prepare for bidders performing due diligence, which requires them to set aside time to prepare and provide additional documents to interested parties. That said, they can also benefit from this process immensely. For example, they can use tracking and reporting data to help with negotiations by determining the interest levels of bidders and the specific areas of the company or deal that matter to them.