How to Value an Insurance Agency in 2026

Per Sica Fletcher’s 2025 insurance broker M&A valuations report, average EBITDA multiples for deals greater than $1 million of EBITDA reached 11.8x in the first half of 2025, in line with the 11.9x full-year 2024 average and approximately 29 percent above the 2020 trough of 9.4x. The four-year peak of 12.1x set in Q3 2024 has not been reclaimed. M&A-advisor-represented deals cleared roughly 25 percent higher multiples than unrepresented transactions over that same period. Per MarshBerry’s 2025 brokerage M&A report, private capital-backed buyers drove 72.6 percent of announced deals through the first eleven months of 2025 (471 of 649); independent agencies accounted for 13.7 percent (89 deals); the top three buyers (BroadStreet Partners, World Insurance Associates, and Hub International) represented 20.2 percent of total transaction volume.

Most agency valuation guides published online are stale by two cycles, oversimplified into “two times revenue,” or written by parties who profit from inflating the headline number. This guide gives operators the framework serious M&A advisors use, with the publicly reported 2025 numbers, and the eight factors that move multiples in either direction.

How insurance agencies are actually valued

Three methods are in active use. One of them is the real one.

Revenue multiples. The simplest method, and the one principals quote at industry events. Revenue does not capture profitability. A $5M-revenue agency running 22 percent EBITDA margin is a different business than a $5M-revenue agency running 32 percent margin, and revenue multiples flatten that distinction. Use revenue multiples for back-of-envelope sanity checks. Do not use them in serious negotiations.

EBITDA multiples: the real method. EBITDA (earnings before interest, taxes, depreciation, and amortization) is the cash-flow proxy buyers actually price. For agencies, EBITDA is calculated specifically: commission and fee revenue, less producer compensation, less operating expenses, with adjustments. The publicly reported aggregate is the H1 2025 average of 11.8x for deals greater than $1 million of EBITDA, in a four-year range of 9.4x (2020 trough) to 12.1x (Q3 2024 peak) per Sica Fletcher’s 2025 report. Per Sica Fletcher’s 2026 outlook in Leader’s Edge, Mike Fletcher reports average multiples for deals greater than $1 million of EBITDA at “roughly 11.4x in 2025.” Two cuts of the same data; reconcile against the specific deal profile under negotiation.

Adjusted EBITDA. Where the real negotiation happens. Buyers and sellers disagree about what to add back and what to remove. Standard add-backs include owner compensation in excess of market rate, owner family members on payroll, non-recurring legal or consulting expenses, one-time technology investments, and personal expenses run through the business. Standard removals include below-market rent paid to owner-related entities, capitalized expenses that should be operating, and any revenue that is not genuinely recurring (one-time consulting fees, contingent revenue that is not historical-average normalized).

Where principals overestimate: aggressive add-backs that a sophisticated buyer’s quality-of-earnings analyst will reject. The negotiation peaks at the LOI; the Q-of-E adjustment is where it actually settles.

Discounted cash flow. Used in larger transactions ($20M-plus enterprise value) and in valuations where future cash flows diverge meaningfully from current. Rarely the determining method for transactions under $10M EV, but principals selling to internal succession or ESOPs will encounter DCF in formal valuations.

What the public 2025 data tells you

The publicly reported aggregate is what we have on solid ground. Tier and segment breakdowns below the headline aggregate are not published in Sica Fletcher’s H1 2025 report or in MarshBerry’s public 2025 commentary. MarshBerry, Reagan Consulting, and OPTIS Partners publish tiered data on subscription basis. Buyers and advisors will quote figures from those subscription products in negotiation; verify the source before you accept the framing.

Aggregate (deals greater than $1M EBITDA). Per Sica Fletcher, H1 2025 averaged 11.8x, in line with 11.9x full-year 2024 and 12.1x at the Q3 2024 peak. Sica Fletcher’s public commentary describes the cycle as relative stabilization following 29 percent expansion since 2020. Advisor-represented deals cleared roughly 25 percent higher multiples than unrepresented transactions over that period.

Buyer-mix. Per the MarshBerry 2025 report, private capital-backed buyers (PE-sponsored aggregators) accounted for 72.6 percent of announced 2025 deals through November (471 of 649); independent agencies accounted for 13.7 percent (89). The top three buyers (BroadStreet Partners, World Insurance Associates, and Hub International) represented 20.2 percent of total transaction volume.

Q1 2026 deal-flow. Per OPTIS Partners’ Q1 2026 commentary, Q1 2026 closed at 148 announced deals, the lowest Q1 since 2016 and a 6 percent year-over-year decline; PE-backed buyers accounted for 72 percent of announced volume. OPTIS partner Steve Germundson said the three-year slide in deal volume “is beginning to bottom out to about 650 deals per year.”

The multiple is the negotiated residue of buyer competition, capital structure, and quality of earnings.

The eight factors that move multiples

Inside any revenue tier, the eight factors below explain why two agencies of identical size clear different multiples. Run the diagnostic on your own book before you talk to an advisor.

1. Recurring revenue concentration. Commercial lines revenue prices higher than personal lines because the renewal economics are stickier and the per-account profitability is higher. Within commercial, specialty and program business prices higher than generalist.

2. Producer concentration risk. If the top producer controls a disproportionate share of book commissions, buyers haircut the multiple. The principal-as-largest-producer pattern is the most common version.

3. Carrier concentration risk. A small number of carriers controlling the majority of revenue is a flag. Buyers price in the risk of carrier appetite changes, contingent commission renegotiation, and strategic-account moves.

4. Geographic concentration. Single-zip-code agencies are vulnerable to local economic shocks, which buyers price. Multi-county or multi-state footprints are valued more highly when the operations are integrated rather than three independent operations.

5. Growth trajectory. Three-year revenue CAGR is the headline metric. Flat-to-declining agencies clear at the bottom of their tier even with strong margins. Buyers are paying for both current cash flows and the future trajectory.

6. EBITDA margin and quality of earnings. Margin is the headline. Quality of earnings (the durability and reproducibility of that margin) is where the negotiation happens. A margin sustained over three years prices higher than a margin that spiked in the trailing twelve months.

7. Producer non-compete enforceability. State-by-state. In states where non-competes are enforceable and the agency has been disciplined about agreements, the producer flight risk is lower and multiples reflect that. In states where non-competes are limited or unenforceable, buyers price the flight risk into the multiple. State-level law continues to govern; confirm against current statute and case law for the agency’s footprint.

8. Operational systematization. The “can it run without you” factor. An agency where the principal is the operating center (owns the largest accounts, is the primary carrier relationship, and is the bottleneck for non-routine decisions) sells for less than an agency where systems, sub-leadership, and documentation make principal exit possible.

How buyers actually evaluate

The process from initial inquiry to closed transaction is more structured than first-time sellers expect.

Initial inquiry. A buyer reaches out, often through an advisor, expressing interest. At this stage, the buyer is fishing. They have not committed to a process. Treat initial inquiries as informational. A serious sale process starts with the seller engaging an advisor and running a structured process, not with a single-buyer reactive negotiation.

Indication of interest. A non-binding range, typically expressed as a multiple of EBITDA on stated trailing-twelve-month financials. The IOI is the buyer’s opening position. It will move down through Q-of-E and may move up through competitive bidding.

Letter of intent. Binding on exclusivity, non-binding on price. The LOI specifies the headline number, the structure (cash, rollover equity, earn-out), the diligence period, and the closing conditions. This is where the seller’s negotiating position peaks. Once you have signed exclusivity, that position weakens.

Quality of earnings analysis. Where multiples adjust. The buyer’s Q-of-E firm reconstructs adjusted EBITDA from primary financial documents. Seller-proposed add-backs that do not survive Q-of-E come out of the multiple base. Revenue items that are not genuinely recurring are normalized.

Due diligence reality. Legal, regulatory, employment, carrier appointments, E&O claims history, key contract review. Diligence rarely kills a transaction outright. Diligence frequently changes structure: more cash held back in escrow, larger earn-out portion, indemnification caps tightened.

Earn-out structures. A portion of total consideration is contingent on post-close performance. Negotiate the metric definition carefully. Earn-outs measured against aggressive pro-forma cost takeouts and cross-sell projections are how sellers lose contingent value. Negotiate against actual performance retention, not buyer-imposed stretch targets.

Buyer categories and their math

Each buyer type prices differently. Understanding the math for each category is what separates sellers who optimize for headline price from sellers who optimize for actual after-tax outcome.

PE-backed rollups. The dominant buyer category in the current cycle. Per MarshBerry’s 2025 report, private capital-backed buyers drove 72.6 percent of announced 2025 deals; per OPTIS Partners’ Q1 2026 commentary, PE-backed buyers accounted for 72 percent of Q1 2026 announced volume. PE-backed structures typically combine cash at close with rollover equity and a contingent earn-out. The math works for sellers who want to take chips off the table while retaining upside in a larger platform; it does not work for sellers who want clean exits.

Strategic regional buyers. Mid-sized regional and super-regional agencies acquiring for geographic, line-of-business, or specialty reasons. Per MarshBerry’s 2025 report, independent agencies were 13.7 percent of 2025 announced deals (89 of 649); the strategic-regional buyer pool is materially smaller than the PE-backed pool but not absent. Structures are typically more flexible than PE rollups: more cash at close, less rollover equity, smaller earn-outs in many cases. The math works for sellers who want certainty and a cleaner transition.

Internal succession (ESOP, family transition, perpetuation). Headline multiples are typically lower than external sale, but tax-advantaged structures change the after-tax comparison. ESOPs in particular offer deferred or eliminated capital gains treatment under §1042 of the Internal Revenue Code for selling shareholders who reinvest proceeds into qualified replacement property and meet other §1042 requirements. Confirm the current §1042 requirements with tax counsel before structuring; the rule is well established but the details matter. For principals who care about legacy and employee outcomes alongside price, the after-tax math frequently warrants comparison to external-sale outcomes.

Producer buyouts. The smallest deals. Typically a senior producer or producer team buying out a retiring principal’s book. Structures are heavily seller-financed. Frequently misjudged on value: sellers under-negotiate because they want the producer to succeed; producers over-negotiate because they have weaker financing.

Headline multiple is the marketing number. Structure and tax treatment determine the actual after-tax outcome.

When to get valued vs. when to sell

These are not the same decision. Treat them separately.

Get a formal valuation every two to three years regardless of sale intent. A formal valuation is a strategic instrument. It establishes the current number, identifies the factors holding the multiple down, and creates a benchmark for measuring whether operational improvements are moving the needle.

A recent formal valuation strengthens negotiating position. Buyers come in with their own analysis. Sellers without their own analysis are negotiating against the buyer’s number. Sellers with a recent valuation from a credible advisor are negotiating against a defended number. The negotiation dynamic shifts accordingly.

Pre-sale value-improvement actions. Eighteen-to-thirty-six months before sale, specific actions can move multiples. Reducing producer concentration through hires or book transitions. Building systematization that reduces principal dependency. Cleaning up financials so add-backs are minimal and Q-of-E adjustments are small. Strengthening producer non-competes and employment agreements. These are the levers; how much each is worth depends on the agency’s specific profile and the buyer pool the seller is targeting.

Conclusion

The publicly reported numbers set the frame: 11.8x H1 2025 average for deals greater than $1M EBITDA per Sica Fletcher, 72.6 percent PE-backed share per MarshBerry, and the roughly 25 percent advisor-represented premium. The agency-specific number sits inside that frame, moved up or down by the eight factors above and the buyer category negotiated against.

Get a formal valuation regardless of whether you intend to sell in the next five years. The number itself matters less than the diagnostic that produces it: which factors are holding your multiple down, which buyer categories your agency profile fits best, what eighteen-to-thirty-six months of focused improvement could be worth.

When the sale process begins, advisor selection becomes the next decision. Different advisors specialize in different buyer pools, deal sizes, and engagement models. Our comparison of the four major agency M&A advisors walks through the selection framework.