The merger of three agencies with diverse locations and product mix creates the state’s second largest independently owned agency.
Last winter when Gayle McCann was looking for a location in St.Cloud to better serve her company’s clients in that area, her first thought was to simply to create a branch there of the St. Paul-based Johnson-McCann Agency. However, Steve Lounsberry, Johnson McCann’s advisor at the Sitkins International insurance consulting operation, had another idea. How about merging with another agency that already had roots in St. Cloud?
With 30 years in the business, Gayle and her husband and business partner, Pat McCann, knew that such mergers were not simple. But Pat decided to investigate the possibility. He contacted John Delinsky of the multi-line Apollo Insurance Agency and asked if Delinsky and his agency partners would be interested in discussing the possibility of working together with him and his wife.
Delinsky, along DeEtte Wurm and Steve Thelen, agreed to meet the McCanns and Lounsberry over coffee. Initially, there was understandable apprehension since they were not very familiar with Johnson McCann, a mainly employee benefit agency that had started in 1984 with a medical clinic and publishing company as clients. It now generates more than $145 million annually, mainly in benefits premium from 340 clients. Apollo has over 40 employees who produce around $70 million in annual property-casualty premium.
Eventually, another important element was added: the inclusion of the C.O. Brown Agency in Rochester, which was approached because it, along with Apollo, is associated with Broadstreet Capital, a Columbus, Ohio-based venture capital firm that invests in top-performing independent agencies. The 95-year-old Rochester agency, headed by president Mark Hayford, has 85 employees and generates in excess of $80 million in annual p/c premium.
As conversations among the three parties continued over the ensuing six months, a mutual comfort level emerged. “It eventually became clear that we had some very compatible areas,” Pat McCann said. “Also, there were some things that one agency was doing, that another was not, and vice versa. In the end, a merger made a lot of sense because the increased resources and wider geographical reach meant that we could offer much more to our clients, who are truly the key people in this.”
By the end of December all the paper work had been signed to complete one of the largest and most unusual mergers in the state’s history. The new operation will generate more than $20 million in annual revenue, which is thought will make it the second largest privately owned brokerage in Minnesota behind the Hays Companies of Minneapolis. The agencies will continue to operate under their current names, although there are plans to eventually bring them under one umbrella for branding purposes. The principals exchanged equity in a three-way stock deal making them all shareholders in the combined effort, with McCann serving as president. Together there will be 150 employees at offices in Rochester, Mankato, Kasson, Red Wing, Lake City, Austin, St. Cloud, Albany, Melrose, Alexandria, Monticello and St. Paul.
“The key thing in this merger was that it was accomplished with the decision-makers, who are not part of a national firm or bank,” Pat McCann pointed out. “Our clients will continue to have easy access to us. We consider that a major competitive advantage. In addition, most of our principals are sales people who clearly appreciate that the client comes first. The merger means all of us now have access to far more companies and resources, which is crucial in this changing environment. This used to be a totally relationship business, but that changed as group premiums, for example, quadrupled. Clients need advisors with expertise, size and scale, who have the resources they now need, such as legal and HR hotlines, as well as risk managers and wellness coordinators.
“We need to consolidate our business systems, but that’s not what we’re focusing on right now,” he continued. “We’re talking with clients about how we can now serve them more effectively by giving them the opportunity to work with a single provider for all of their commercial insurance and employee benefits needs.”
The new insurance group plans further expansion. “We’re interested in owners that want more markets, services and a reliable succession plan,” said Pat McCann. “Our partners run their own businesses.”