In the midst of the recent record-setting merger-and-acquisitionactivity among insurance agents and brokers, you may have pondered:Should we consider selling the company, and if so, how can webest prepare to maximize our valuation?

Regarding the first part of that question, it depends on whenyou need to make your exit — especially if you don't have a youngergeneration to buy the agency from you. If you plan to leave thebusiness within the next three to five years, consider selling nowto capture the current top-tier valuations.

If you plan to be around longer than five years, selling now —even at the current elevated valuations — is likely not your wisestfinancial move. Even so, think about engineering a transaction acouple years before your exit in case external factors become asales impediment. However, if your company needs certain marketresources that can be obtained only by selling to and partneringwith a larger, more robust organization, then you need to pull thetrigger sooner.

Where to start

Notwithstanding when you sell, you will need to focus on someissues immediately to maximize your valuation. Begin with cleaningup your balance sheet and income statement.

On the balance sheet, pay particular attention to thetrust-fiduciary, trade receivables and trade payables accounts toensure that they are in balance. In addition, remove allnon-operating assets, including loans due from owners. Pay off orpay down debt as quickly as possible.

On the income statement, eliminate or clearly isolatenon-business expenses, and limit non-deductible expenses to thegreatest extent possible. Potential acquirers know that your actualfinancial results will be adjusted for these items to derive theearnings that will be the foundation of your valuation. Isolate anddefine non-recurring post-transaction expenses, such as legal orother advisory fees related to the transaction. This will produceyour truest income statement, which should increase your firm'svaluation in the sale.

Remember to also get all of your corporate records, minutebooks, stock certificates, certificates of authority, licenses,permits and related documents in order. Have your legal counselinvestigate whether there are any inaccurate open liens, UCCfilings or similar items. Nothing is worse than a mad scramble theday before the closing to sort out these sometimes complicatedmatters. In addition to the stress, that mad dash to the finishline can rack up some costly legal fees and related expenses.

A couple of additional items that you could and probably shouldfocus on before selling include:

• Consolidating your Property & Casualty markets to achieveefficiencies and to maximize contingent-bonus commissions and otheropportunities.

• Moving small and commodity business to insurance company servicecenters to achieve additional efficiencies.

Regardless of where you are in the M&A cycle — two or 10years out from selling your business — these recommendations aresolid operating procedures.

An agency owner always should follow a couple principles. First,always run and manage the agency as a business and not as anextension of lifestyle. Second, run and manage the agency toposition it for maximum valuation as if you need to sell ittomorrow.

Tim Cunningham, is a founding principal of Optis Partners, aChicago-based specialty investment banking consultingfirm.