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Also in this issue:

Strategic Advantage, Part I

A Rose by Any Other Name

Strategic Advantage, Part II

The Small Case Market

Are You Tweeting Yet?

Let’s Buy a Voluntary Insurance Company

Don’t Go Through 2010 Blind

Enrollment Practices

Is the Worksite Business “Recession Proof”?

A Moving Target

Winter 2010, No. 82

Let’s Buy a Voluntary Insurance Company

Looking in from the outside, acquisition often looks very appealing. Assuming a strategic rather than a purely financial transaction, you get an ongoing business, resident expertise, and the ability to leverage your resources. Immediately!

Then why aren’t there more examples of very successful acquisitions? Think about the last three significant acquisitions and look at what has happened. By and large, either the result has been to diminish the acquired company’s effectiveness, or the two companies have wound up just about where they were before the transaction. The key to avoiding these fates is to begin the M&A process with two fundamental questions.

What do we want to buy and why?

This requires an in-depth understanding of the industry as well as the target company’s strengths and weaknesses. We need to be able to define the resources we lack that our strategy requires. At least fifty percent of the time, that simple question demonstrates that acquiring an existing, successful voluntary carrier is an inefficient way to reach our goal.

What are we going to do with it afterwards?

This is the tougher part, because it’s difficult to be realistic about our ability to change the behaviors and habits of other people. “If we had this capability, our producers would jump on the voluntary bandwagon!” Rarely true. People change for a basic reason. They are convinced that the rewards for changing will exceed their current rewards and the penalties for not changing are real and imminent. No acquisition automatically brings those characteristics.