In Part 1, we explained how tighter buyer underwriting is quietly reshaping insurance agency valuations. But underwriting adjustments aren’t the only risk sellers face in today’s market.
There’s another growing issue: retrading.
After signing a Letter of Intent (LOI), some buyers are returning during due diligence to renegotiate price. The headline multiple may remain the same, but the EBITDA it’s applied to changes — and the final purchase price drops.
Understanding this retrade trap is critical if you want to protect the value of your insurance agency.
How Deals Change After the LOI
An increase in buyers has created more competition in the insurance M&A market. While competition can benefit sellers, it has also led some buyers to use aggressive tactics during due diligence.
One of the most common is retrading.
After you sign a Letter of Intent (LOI), buyers may attempt to renegotiate the purchase price. They often claim your projected EBITDA margin did not account for necessary future investment in marketing, staffing, technology, or corporate overhead.
The EBITDA multiple may remain unchanged.
But the EBITDA it’s applied to gets adjusted downward — resulting in a lower purchase price.
This process can feel like “death by a thousand cuts.” Small revisions to projections, working capital, or expense assumptions compound into meaningful reductions in value.
Why Sellers Lose Leverage
By the time retrading occurs:
- You are typically in an exclusivity period.
- You have stepped away from other potential buyers.
- You may be emotionally committed to the transaction.
Walking away feels daunting. Restarting the process feels exhausting.
Some buyers understand this dynamic. In certain cases, they may knowingly accept aggressive projections at the LOI stage, anticipating that the price will come down during due diligence.
This happens with both national and regional buyers.
With smaller buyers, retrading often appears when a lender determines the deal cannot support the original purchase price. If financing falls short, the buyer may return to renegotiate terms — lowering the price, reducing cash at closing, or both.
How to Protect the Value of Your Insurance Agency
At INS Capital Group, we advise clients to anticipate retrading risk before entering the market.
The key protections include:
- Establishing realistic valuation expectations upfront
- Stress-testing projections before presenting to buyers
- Properly vetting buyers’ financial capacity
- Structuring deals to limit retrade exposure
If valuation is below your target, we help identify the specific operational drivers that increase value — allowing you to improve positioning before launching a sale process.
Preparation is the difference between negotiating from strength and reacting under pressure.
Summary
In this two-part series, we’ve outlined:
- How tighter underwriting is affecting insurance agency valuations
- Why steady EBITDA multiples can be misleading
- How retrading tactics can reduce insurance agency sale prices after the LOI
Headlines may suggest stability in the insurance M&A market. The reality is more nuanced.
Understanding these shifts — and preparing for them — is essential to protecting the value of your agency.