• Resources
• 1. Executive Summary
• 2. Public Adjuster Market Overview
• 2.1 Scope of Services
• 2.2 Estimated Market Size
• U.S. Overall
• Texas Market
• 3. Rationale for Consolidation
• 3.1 Fragmented Landscape
• 3.2 Under-Penetration by Private Equity
• 3.3 Potential Synergies
• 4. Proposed Strategy
• 4.1 Acquire an Initial “Platform” Company
• 4.2 Roll-Up Smaller PA Firms
• 4.3 Growth Timeline
• Target Revenue Trajectory
• 5. Financial Model & Capital Requirements
• 5.1 High-Level Economics
• Platform Acquisition
• Tuck-In Acquisitions
• Total Upfront Capital
• With Leverage
• 6. Potential Returns & Investment Thesis
• 6.1 Value Creation Drivers
• 6.2 Potential Exit Opportunities
• 7. Key Risks & Mitigations
• 8. Conclusion & Next Steps

Resources

• Eric Gilkey The Good, the Bad, and the Ugly
• Texas Department of Insurance Public adjusters: What to know before you hire one to help with your claim
• Public Adjusters in Texas: https://www.napia.com/find-a-public-adjuster?State=texas
• Example of a ‘real life’ deal Pete Weishaupt Deal Flow: Insurance Adjuster For Sale

1. Executive Summary

• Opportunity: Acquire a mid-sized public adjuster firm in Texas (the “platform”), then systematically roll up smaller local PA firms, leveraging economies of scale in marketing, technology, and brand recognition.
• Goal: Reach approximately $50 million in revenue within five years.
• Value Proposition to Investors:
• Fragmented Market – Low consolidation to date; significant opportunity for a first-mover advantage.
• High Margins – Well-run PA firms can have EBITDA margins of 20–35%.
• Earn-Out Deal Structures – Minimizes upfront capital, reduces risk, and aligns seller incentives post-acquisition.

2. Public Adjuster Market Overview

2.1 Scope of Services

• Public adjusters advocate for policyholders in property insurance claims.
• Revenue primarily comes from a percentage of the recovered claim, often 10–20% (subject to state fee caps and regulations).

2.2 Estimated Market Size

U.S. Overall

• Total P&C Insurance Market (U.S.): Over $850B in net written premium (2022).
• Property Lines: Roughly $300–350B in premium.
• Loss Ratios & Claims Volume: If we assume ~60% loss ratio on $300B in premium, that implies $180B in annual property claims.
• Public Adjuster Penetration: Estimated at 5–10% of total claims for which policyholders hire public adjusters.
• Resulting PA Industry Revenue:
• If 5% of $180B in claims is handled by PAs = $9B in claims volume.
• At an average fee of 10–15%, total industry revenue might be $900M–$1.35B.
• Some sources and anecdotal data suggest an even broader range ($1–2B).

Note: These numbers are approximate because no comprehensive “public adjuster only” dataset exists. The 5–10% claims penetration is a best estimate across the industry.

Texas Market

• Texas as a Leading State for Weather-Related Claims:
• High incidence of hailstorms, hurricanes along the Gulf Coast, and tornadoes in certain regions.
• Property insurance premium in Texas is often 7–8% of the U.S. total, which suggests the Texas PA market might be in the $70–$150M range, depending on annual storm activity.
• Fragmentation: The majority of public adjuster firms in Texas are small (1–10 adjusters), with a few more prominent multi-office operators.

3. Rationale for Consolidation

3.1 Fragmented Landscape

• Many small firms lack scale and sophisticated marketing/technology.
• Brand recognition is limited to local networks; a larger entity with broader reach can provide significant leverage in advertising, vendor relationships, and negotiation with carriers.

3.2 Under-Penetration by Private Equity

• Compared to retail insurance brokerages or third-party administrators (TPAs), the public adjusting sector has less institutional investment—presenting an opening for early movers.
• Demonstrated success in a few regional PA consolidations suggests potential for a broader platform-based approach.

3.3 Potential Synergies

1. Centralized Back-Office & Compliance
• Licensing, training, and administrative overhead can be consolidated, lowering per-firm costs.
2. Unified Marketing & Lead Generation
• Implement high-ROI digital marketing strategies across the group.
• Aggregate local referral networks under one recognized brand.
3. Technology Integration
• Deploy specialized claims-management software to track performance and standardize processes.
• Improve speed and consistency of claim settlements, enhancing profitability.
4. Negotiating Power
• Larger volume of claims can potentially yield more leverage when dealing with carriers (though this must be done ethically and within regulatory bounds).

4. Proposed Strategy

4.1 Acquire an Initial “Platform” Company

• Size & Profile
• Target a business with $10–15M in revenue and at least a 20–25% EBITDA margin.
• Cost: ~5× EBITDA multiple is assumed in this analysis. For a $10M revenue platform at a 25% margin (=$2.5M EBITDA), purchase price = $12.5M.
• Rationale
• Immediate scale and infrastructure (e.g., back-office, compliance, brand recognition).
• A strong management team that can help integrate future tuck-ins.

4.2 Roll-Up Smaller PA Firms

• Targets
• Firms with $1–3M in revenue, 20–25% EBITDA margins.
• Highly localized but with strong referral networks.
• Deal Structures
• Primarily seller earn-outs to align incentives and preserve relationships post-acquisition.
• Possibly 25–30% paid upfront, 70–75% over 2–3 years, contingent on performance metrics.
• Value Creation
• Centralize marketing, tech, licensing, and compliance.
• Cross-sell advanced claims services (e.g., large commercial claims expertise).
• Grow each acquired firm’s market share through the consolidated platform’s resources.

4.3 Growth Timeline

• Year 1–2: Acquire platform, integrate initial tuck-ins, build brand consistency.
• Year 3–5: Expand aggressively across Texas and potentially into adjacent states with high catastrophic weather exposure (e.g., Louisiana, Florida, Oklahoma).

Target Revenue Trajectory

This is just one possible path. Actual numbers depend on how many firms are acquired and how quickly they integrate.

5. Financial Model & Capital Requirements

5.1 High-Level Economics

Platform Acquisition

• Example:
• Revenue = $10M, EBITDA = $2.5M (25% margin).
• Multiple = 5× EBITDA → Purchase Price = $12.5M.

Tuck-In Acquisitions

• Average Target: $2.5M revenue, $0.5M EBITDA (20% margin).
• Purchase Multiple: ~4× EBITDA → $2.0M purchase price per firm.
• Earn-Out Structure: 30% upfront ($600k) + 70% ($1.4M) over 2–3 years.

To add $35M in incremental revenue (to reach $50M total assuming the platform grows organically to $15M), you might need 14 such acquisitions (14 × $2.5M = $35M).

• Total Upfront for Tuck-Ins: 14 × ($2.0M × 0.30) = $8.4M.
• Deferred (Earn-Out) Liability: 14 × ($2.0M × 0.70) = $19.6M.

Total Upfront Capital

• Platform: $12.5M.
• Tuck-Ins (Upfront): $8.4M.
• Subtotal: $20.9M in immediate purchase capital (assuming no external financing).

With Leverage

• If you finance ~50% of each acquisition with debt (e.g., bank loan, SBA financing, or asset-based lending), the equity portion could drop significantly. For example:
• Platform: $12.5M purchase, 50% financed = $6.25M equity.
• Tuck-Ins: $8.4M upfront total, 50% financed = $4.2M equity.
• Total Equity Needed: $6.25M + $4.2M = ~$10.45M.

Deferred Earn-Outs (~$19.6M) would be paid from operating cash flows as the combined entity grows.

6. Potential Returns & Investment Thesis

6.1 Value Creation Drivers

1. Multiple Expansion
• Smaller firms acquired at ~4× EBITDA; a larger, consolidated platform may command a 6–8× multiple (or higher) upon exit if well-branded and diversified across regions.
2. Economies of Scale
• Consolidated back-office, integrated technology, centralized marketing can each reduce overhead and boost EBITDA margins.
3. Organic Growth
• Enhanced marketing & reputation can drive higher lead volume per office.
• New cross-state licensing can unlock revenue from hurricane/hail-prone areas.
4. Geographic & Claim-Type Diversification
• Spreads out “storm risk” across multiple regions, creating more consistent cash flow.

6.2 Potential Exit Opportunities

1. Private Equity Sponsor
• After building critical mass ($50–$75M in revenue), a larger PE firm might see this as an attractive “platform in a box.”
2. Strategic Acquirer
• A large insurance service conglomerate or multi-state PA firm looking to expand in Texas and adjacent markets.
3. Long-Term Hold for Dividend/Income
• If the capital partners prefer stable cash flows, the combined entity can generate steady income, especially in high-storm years.

7. Key Risks & Mitigations

1. Regulatory & Licensing Complexity
• Risk: Each state’s Department of Insurance has specific licensing rules; partial fee caps or restrictions on ownership.
• Mitigation: Centralized compliance function; dedicated regulatory counsel.
2. Reputation & Relationship-Driven Sales
• Risk: Local PA firms often rely on personal networks (roofers, attorneys, real estate agents). Rapid consolidation could alienate these relationships if not handled delicately.
• Mitigation: Retain local brand goodwill initially or implement a carefully phased rebranding strategy. Offer strong incentives for local owners to stay engaged.
3. Event-Driven Revenue Volatility
• Risk: Revenue spikes after storms/hurricanes; lulls in mild weather years.
• Mitigation: Geographic diversification; build a balance of residential & commercial claims; prudent working-capital management.
4. Integration Challenges
• Risk: Rolling up numerous small firms can lead to cultural friction, disparate systems, and confusion among employees.
• Mitigation: Robust post-merger integration plan (standardized technology, consistent branding, clear communication).
5. Fee Pressures & Competition
• Risk: Some carriers increasingly discourage the use of public adjusters, or new PA entrants undercut fees.
• Mitigation: Focus on specialized, high-value claims handling and superior service. Offer commercial expertise (e.g., large losses) that demand higher fees.

8. Conclusion & Next Steps

Summary

• The public adjuster industry—particularly in Texas—remains highly fragmented, with total U.S. market revenues in the $1–2B range and a Texas subset of $70–$150M.
• Private equity involvement is limited so far, presenting a first-mover opportunity for a sophisticated roll-up.
• With strong margins (20–35% EBITDA) and a fragmented player base, there is significant potential for efficiency gains and multiple expansion via consolidation.
• The proposed plan is to acquire a $10M revenue platform and roll up smaller $2–3M revenue shops using mostly earn-out structures, aiming to reach $50M in total revenue within five years.
• Upfront capital (if entirely equity-funded) may be around $20–21M. With moderate leverage, $10–12M in equity could suffice, with deferred earn-outs covered by future cash flow.

Action Items

1. Detailed Due Diligence: Identify likely platform targets, confirm financials (EBITDA, margins, client mix).
2. Regulatory Assessment: Investigate licensing constraints for multi-office public adjuster ownership in Texas and neighboring states.
3. Investor Roadshow: Present the above strategy to potential equity and debt partners, highlighting synergies, margin potential, and exit pathways.
4. Integration Blueprint: Develop a systematic onboarding process for tuck-in acquisitions (brand, systems, compliance, marketing).

Investor Value: This roll-up strategy offers high-multiple returns (especially if you buy smaller firms at 3–4× EBITDA and eventually exit at 6–8× or higher) and a unique chance to consolidate an undercapitalized, fragmented sector. With proper execution, the model can be replicated beyond Texas, leveraging the platform’s brand and operational efficiencies nationwide.