Entrepreneurship Through Acquisition

Buying an Insurance Brokerage Through a Search Fund: A Two-Acquisition Playbook

Prefer audio? Listen to the full episode on Acquiring Minds, or browse more conversations on the Oberle Podcasts page.

Who I am, and why I keep buying insurance agencies

I grew up in St. Louis, Missouri, and I am a proud Cardinals fan. I went to a small college in Maine. My father, grandfather, and great-grandfather all owned insurance agencies in St. Louis, so the business is in my blood, even though I did not set out to follow that path directly. My career started in San Francisco in the early 2000s, working in the large-account group of an international brokerage and managing insurance programs for publicly traded Bay Area technology firms.

Out in the Bay Area I linked up with two Stanford GSB graduates who had used a search fund to buy a logistics business in South San Francisco. I joined them as one of their first sales hires, and that experience changed everything for me.

"Once I heard about it and learned about it, I almost became kind of unemployable. I was just an entrepreneur, and I was going to do this." August Felker

That exposure to the search fund model set the rest of my career in motion. When those two partners sold their logistics business, I re-partnered with them and decided to launch a search of my own.

Why insurance brokerages are great businesses to buy

Before getting into the two acquisitions, it helps to explain what an insurance brokerage actually is and why it is such an attractive target for an acquisition entrepreneur. A brokerage, also called an insurance agency, functions as the middle person between businesses that need coverage and the carriers that provide it. Clients hire us to help them buy insurance. We go out to the markets, negotiate, place the coverage, and then service that relationship year after year.

The economics are what make it special:

• Recurring commission revenue. We typically earn 10 to 15 percent recurring commission on the premiums we place, and that revenue renews automatically each year.
• Very high retention. Client retention runs around 90 percent. People do not want to change insurance because switching brokers is a hassle, so if you deliver great service, clients stay.
• Recession resistance. Insurance is the last thing a business gives up. As I told Will, it is pressure tested, because everyone has to buy insurance.
• Asset light and scalable. No inventory and no heavy capital requirements, just people, relationships, and recurring contracts.

"It is recession resistant. It kept growing. Everyone has to buy insurance, it is the last thing you would probably give up if you are a business." August Felker

When I bought my first business, multiples for insurance brokers were around six times EBITDA. Since then, a lot of private-equity firms have gotten into the space. There are something like 30 roll-ups going on right now, and they have bid the multiples up to roughly 10 to 12 times EBITDA. That is good for sellers but harder for first-time buyers.

The first acquisition: a traditional search fund

My first deal was a traditional search. I was 29 and did not know how to raise funds or run a process, so my two former partners vouched for me to the investor community. At the time, traditional searches focused on insurance brokerages were rare, and I knew going in that it would be hard.

My strategy was old fashioned and high effort. I leaned heavily on cold calls, and because I had been in sales I was comfortable getting hung up on. I wrote a lot of handwritten letters rather than emails. The third piece was finding a river guide, someone well connected in the industry who could make warm introductions. One of those calls led to an editor who connected me with a brokerage for sale in Madison, Wisconsin. That became my first deal, Murphy Insurance Group.

"I really needed a seller to also teach me the business. I needed to come in and learn it and walk in their shoes for a year or two before I could make changes or do anything." August Felker

The deal structure was humbling. The seller rolled equity, held a seller note, had an earn-out, and was also my landlord, so in many ways he was still my boss even though I was now the CEO. My wife, a West Coaster from Portland, moved with me to Madison in February. It was an adjustment, to put it mildly.

What it is really like to lead after the acquisition

Here is the part nobody fully prepares you for. You think you have it all figured out and you are going to be a great leader. Then you step into the role and there is a magnifying glass on every strength and every weakness you have.

"Being a leader, there is like a huge magnifying glass on all of your strengths and all of your weaknesses. It is magnified enormously when you step into a leadership position." August Felker

My biggest early fear was clients leaving because they did not have a relationship with me yet. Early on, a sales producer who controlled a big chunk of our business left, and I was convinced their clients would follow. So I got in the car and went out to see all of them. They were, frankly, too nice, and they stuck with me. That is when I started to gain confidence that I could keep clients through a transition if I was genuine: tell people the truth, reassure them, and then actually deliver.

One of the things I struggled with most was learning to be authentic. In the beginning I was scripted and a little fake, and not a good listener. The two partners who had backed me sat on my board, and I talked to them almost daily. That built-in support is the great beauty of the traditional model.

"That was the beauty of the traditional search model. You have this built-in group of investors, very smart, capable, experienced people, to guide you through it." August Felker

Even small cultural things mattered. I grew up watching my dad go to work in a suit and tie, so I showed up to my new agency dressed the same way, in a small, informal Wisconsin town where nobody did that. People notice those things. I learned quickly to fit in rather than stand apart.

The exit, and the road to a second act

In the traditional world, the finish line is usually an exit, often five to ten years after you buy. Five or six years in, multiples had risen significantly and we had a good run of growth, so we merged Murphy Insurance Group with Hub International in 2015. I stayed on and ran a region as CEO of Wisconsin, which taught me an enormous amount. Hub is a professional buyer of agencies, and watching how they did it was an education in itself.

But working for a bigger company, after the total control of being an entrepreneur, was not the right long-term fit for me. I still had energy and another venture in me. During the earn-out period, I started thinking seriously about doing it all again, and my wife agreed that if I could find the right opportunity, we would do it. St. Louis kept pulling at me as the place to raise our four kids.

The second acquisition: a self-funded search

The second time around, the constraints were different. Multiples had climbed, so I could not buy something big. It had to be a very small agency I could build. I bought CLH Insurance in St. Louis and launched Oberle Risk Strategies in 2019. The business was roughly a million in revenue, with EBITDA under half a million, genuinely small.

"When you buy something really small, it is just a totally different job than when you buy a bigger business. At the bigger company we had accounting people, even an IT guy. Here, we had nothing." August Felker

A few things stood out about doing it the self-funded way:

• Different financing. I did not use an SBA loan. I found a lender already in the insurance business, essentially an insurance company with a bank attached, that understood my background and mirrored a 10-year SBA-style deal.
• Less built-in support. Without a traditional board, I had to proactively build my own group of peers to learn from and lean on. In the traditional world that coaching was baked in.
• The second search is easier. Almost every repeat searcher says this. You have confidence, credibility, and you skip what does not work.
• Same scrappy playbook. I still did a lot of phone calls and handwritten notes. The seller I ultimately bought from had my handwritten note on his desk months later, and it resonated.

I also wanted my own brand. The business I had bought was called CLH Insurance, but I worked with a marketing friend to find a name that was personal and distinctive. Oberle was a family name on my great-grandmother's side, an old German name that loosely means on a hill. It was unique, it was mine, and it stuck.

"Because there are so many roll-ups going on in insurance, we are now unique in that we are independent. I think that helps with recruiting, and it helps when you are talking to clients." August Felker

Traditional vs. self-funded search: the honest comparison

People always ask me which path is better. The truth is they are different jobs with different trade-offs:

• Business size. Traditional searches tend toward bigger companies, while self-funded searches usually mean smaller ones you grow.
• Support and mentorship. Traditional gives you a board and investors as built-in advisors, while self-funded means you have to assemble that support yourself.
• Control and equity. Self-funded keeps more ownership and decision-making in your hands.
• Time horizon. Traditional often points toward a forced exit in five to ten years, while self-funded lets you hold forever if you want to, which is my plan for Oberle.

Both are legitimate. Having done a traditional search first gave me the experience and credibility to do a self-funded one with far more confidence the second time.

Helping searchers get insurance right

What I love most now is working in a niche I genuinely care about, which is serving searchers and acquisition entrepreneurs. These are people putting their careers and lives on the line to buy a business and move somewhere new. I know that feeling of being scared and nervous and taking the leap, and I love helping make at least one part of it easier.

Searchers do not have four people working on their diligence. It is just them, juggling accounting, legal, lenders, equity, and the seller all at once. So our ETA team steps in on the insurance side, and what we consistently find is that small-business sellers, scrappy and clever as they are, often skip a few important coverages.

• A seller without a board may carry no directors-and-officers (D&O) insurance, which a searcher with investors will need.
• We often see quirky auto insurance arrangements, bought personally or structured in unusual ways.
• There are frequently gaps that only surface in a careful pre-close review.

Our diligence offering is free. We typically kick off four to eight weeks before closing, summarize findings in a clear due-diligence report, and implement improved coverage at close. In about 9 of every 10 engagements, we are able to reduce spending or improve coverage. The goal is simple: come in as someone who has actually done a deal, make the insurance part easy, and earn enough trust that clients feel like we are part of their company.

"People do not love buying insurance. But if we can make it easy and hassle-free, and have people totally trust us, like we are their insurance person, that is a huge win." August Felker

Is there still opportunity in insurance brokerages?

I get asked regularly by searchers interested in buying an agency. The honest answer is that the big issue is the multiple. You are paying eight to ten times EBITDA now, and a lot of traditional investors hesitate at that. Insurance agencies are also tough to grow organically, which makes the math harder. That said, the independent, high-touch, service-first model is increasingly rare as roll-ups consolidate everything, and rarity is its own advantage in recruiting and in winning clients who want a partner that is not owned by private equity. For the right operator who loves the niche, the opportunity is still real.

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