Agency acquisitions are becoming more common.
For any agency, the key to valuation is anticipated cash flow.
However, the value (or lack thereof) of an agency's provider
contracts is equally important. Providers typically have
thousands of customers so their sources of income are
diverse, but if an agency loses one provider contract it
can have disastrous effects. Not only is the agency's income
stream affected but so is the agency's valuation. Thus, it
is very important that agents protect their income - and
their potential exit value - by investing the necessary
amount of resources into properly negotiating their
While most agents know to look for important clauses in their
provider agreements (such as evergreen, non-solicitation,
etc.), the vast majority of agents don't understand the
interplay between the various sections of an agreement. For
example, while the commissions section of an agreement may appear to contain an
evergreen clause, a seemingly unrelated section could contain language that completely
negates the evergreen clause. This is why it's so important that agents retain experienced
legal counsel to thoroughly vet their agreements.
Any agency can say it has solid provider agreements, but how strong is each contract in
reality? Will the contract survive if the agency is purchased? What if the provider is
purchased? Will the agent be paid commissions for the life of each customer, or are there
certain circumstances under which the provider can terminate commissions?
These are all
points to be aware of to protect not only your income but ultimately the value of your
Whether you're an agent who needs help with provider agreements or a VAR, VoIP
company or cloud provider, Ben's full-service law practice can help you achieve your
business goals. Ben and his team of telecom, IT and cloud lawyers have the technological
understanding, legal knowledge and practical business experience to provide.