Why does the quoted multiple overstate what a seller receives?
Because in this sector the quoted number is usually the maximum, and the maximum requires every earnout to be achieved. Valuations as a multiple of EBITDA on an upfront base purchase price averaged 11.57x across all firms at the end of the second quarter of 2026, with potential total enterprise value reaching up to 14.61x when maximum earnouts are achieved (MarshBerry).
That is a gap of roughly three turns, and it is contingent consideration. High-performing firms show the same structure at a higher level: an average of 14.22x on the upfront base with potential total enterprise value up to 17.45x (same source). The proportion held back is broadly consistent across the quality spectrum, which tells you it is a structural feature of how this sector transacts rather than a discount applied to weaker books.
The relevant question is therefore how much of that contingent portion is historically paid, and the general market answer is sobering. Across deals carrying an earnout, closer to one in five earnout dollars is actually paid (SRS Acquiom, M&A Earnout and Milestone Trends, published 7 July 2026, on a full-year 2025 deal population). That figure covers private-target transactions generally rather than insurance distribution specifically, and we have found no sector-level equivalent, but no seller should assume their sector is the exception without evidence.
Read together, the arithmetic changes the comparison an owner is making. A headline of fourteen and a half times, of which eleven and a half arrives at closing and the balance depends on performance measured by the buyer against a definition the buyer drafted, is not the same offer as eleven and a half times paid in cash. Comparing two bids on their headline numbers, when one is structured more aggressively than the other, is the most common way value is lost in this sector.
| Cohort | Upfront base multiple | Maximum total enterprise value | Contingent portion |
|---|---|---|---|
| All firms, end of Q2 2026 | 11.57x | 14.61x | 3.04 turns |
| High-performing firms, end of Q2 2026 | 14.22x | 17.45x | 3.23 turns |
What is happening to deal activity?
It is easing from a very high base while pricing holds for good books. There were 241 announced US transactions as of 31 May 2026, down 5.1% against 254 through May a year earlier (MarshBerry). Volume down modestly, valuations sustained, buyers more selective: that combination describes a market discriminating rather than retreating.
The buyer set has been dominated by sponsor-backed acquirers for several years, with private equity-sponsored buyers driving over 80% of insurance brokerage transactions across 2024 and into 2025. Like wealth management, this is a vertical where the counterparty across the table has almost always done this before and has settled positions on every document.
The wider market context is more favourable than the sector-specific volume figure suggests. Businesses with regulated, recurring, contractually renewing revenue have been the ones attracting capital in 2026, and healthcare, environmental services and accounting have all shown the same pattern of sponsor share gain. Insurance distribution has the cleanest version of that revenue profile in the middle market.
For an owner the read is that the bid is there and it is discriminating. The businesses that are not clearing are the ones with a retention problem, a concentration problem or a producer problem, and all three are diagnosable well before a process starts.
“An owner brings us two offers, one at fourteen times and one at twelve, and asks which is better. Neither answer is the multiple. The twelve was almost entirely cash at closing and the fourteen had four turns riding on a three-year retention test that the buyer measures. Once you convert both to what actually lands, the ranking flips, and it flips more often than owners expect.”
What do buyers actually pay for?
Retention first, then the independence of the book from any single person or carrier, then growth. Those three, in that order, determine both the level of the multiple and how much of it is paid at closing rather than deferred.
Retention drives the deferred proportion more than it drives the headline. A book with high, demonstrable, multi-year retention supports a larger cash-at-close component because the buyer needs less protection; a book with weaker or undocumented retention is bought with structure instead of price. The commonly cited thresholds in this market sit around ninety percent for premium treatment and around eighty percent as the level below which structure takes over, though we have not found an attributable publisher for those specific numbers and would treat them as practitioner rules of thumb rather than data.
Producer independence is the sector's version of key-man risk and it is measured precisely. A buyer will look at the share of commission attributable to the top producer, whether accounts follow the individual or the agency, what the employment and non-solicitation agreements actually say, and how old the producing group is. A book that walks out with a producer is not a book the buyer has bought.
Carrier and channel concentration is the one owners most often under-report. Heavy dependence on a single carrier appointment, a single programme, or a single referral channel introduces a risk the buyer cannot control and did not create, and it prices down for the same reason customer concentration prices down in any other business. Where the concentration is genuinely structural, the honest approach is to disclose it early and negotiate the structure around it, rather than to have it emerge in week ten.
What does the succession gap actually change?
It changes who the seller is negotiating against, because an owner with no internal successor has fewer alternatives and buyers know it. The internal sale, the producer buyout and the generational transfer are all off the table, which removes the only credible non-market options an agency owner has.
The mechanics matter more than the demographics. An owner in their sixties without a successor is on a clock that is not set by the market, and the risk is not that they sell at a bad time. It is that they sell after a health event or a producer departure, at which point the book has an unresolved question inside it and the buyer prices that question.
The one structural response available is to build the successor position rather than to wait for a buyer to supply it. That means a second producer with genuine account ownership, documented client relationships that do not run through the principal, and a management layer that can operate the agency through a transition. It takes years, which is precisely why it is worth starting before the decision to sell is made.
Where that is not possible, the alternative is to sell earlier rather than later, into a market that is still discriminating in favour of quality. An agency sold while the principal is active and producing is a different asset from the same agency sold as a wind-down, and the difference is worth considerably more than any negotiation on the multiple.
How should an owner compare offers?
By converting every offer to cash at closing, then valuing the contingent portion separately and sceptically, then comparing what happens to the seller's own position afterwards. Three steps, in that order, and the multiple never appears in the comparison.
Step one is arithmetic. Take the upfront base consideration and subtract escrow, holdback and any working capital adjustment exposure. That is the number to compare across bids, and against the sector average of 11.57x on the upfront base it will tell you quickly whether an offer is genuinely competitive or is competitive only on the headline.
Step two is discounting the earnout. Given that closer to one in five earnout dollars is paid across the general private-target population, treat contingent consideration as materially less than face value unless the measurement is objective, short-dated, and within the seller's control after closing. Retention measured over three years by the acquirer, on a definition the acquirer drafted, meets none of those tests.
Step three is the part that is not in the offer letter. What happens to the seller's role, to the producing team, to the carrier relationships and to any equity taken in the acquirer will determine the outcome as much as the price. In a vertical this consolidated, the acquirer's own trajectory becomes the seller's exposure the moment any consideration is deferred or rolled over.
As of August 2026
Sources: MarshBerry, for valuations as a multiple of EBITDA on an upfront base purchase price averaging 11.57x across all firms at the end of the second quarter of 2026 with potential total enterprise value up to 14.61x when maximum earnouts are achieved, for high-performing firms averaging 14.22x on the upfront base with potential total enterprise value up to 17.45x, and for 241 announced US transactions as of 31 May 2026, down 5.1% against 254 through May a year earlier; industry reporting on insurance brokerage transactions for private equity-sponsored acquirers driving over 80% of activity across 2024 and into 2025; SRS Acquiom, M&A Earnout and Milestone Trends, published 7 July 2026 on a full-year 2025 deal population, for closer to one in five earnout dollars actually being paid across private-target transactions generally, a figure that is not insurance-specific and is quoted here with that limitation stated. The retention thresholds referred to in the text, of roughly ninety percent for premium treatment and roughly eighty percent as the level below which structure takes over, circulate widely in this sector without an attributable publisher and are described here as practitioner rules of thumb rather than as data. The offer-comparison sequence and the diligence areas set out above are drawn from our own mandate practice; no published series measures how often each one changes an outcome. Companion articles on this site cover how earnouts are actually paid, customer concentration, and the succession gap facing owner-operated businesses.