As the competition in the insurance industry continues to increase, and major national and international corporations are becoming more predominant, mid-size agencies are looking for strategies to remain competitive and not get acquired by larger firms. Western States Insurance Agency (WSI) is making an attempt to grow their company in hopes of being more competitive, specifically on the west coast of the United States. With a goal of taking the company public, WSI is looking to expand their company through acquisitions while maintaining a low-risk profile for potential investors. Ed Kirby, a business professor, was approached by the dean of his business school to help Dennis Toussanit, a senior executive for Combined Benefits Management Inc. (CMBI). CMBI was a wholly owned subsidiary of Blue Cross and Blue Shield of Montana (BCBS-MT), with managing responsibilities for a group of subsidiaries that included WSI. Western States Insurance agency was a subsidiary of CMBI and Toussaint was looking for consulting help from Kirby about exploring different avenues for diversifying risk while continuing to grow the company as a whole.
Western States Insurance Agency currently has 17 locations throughout the states of Montana and Oregon, with over 200 employees and a part of the top 100 largest insurance agencies in the United States. “WSI’s management structure blended a centralized financial, administrative, and technical structure wit ha decentralized operating structure that was designed to allow the local branches to respond to the day-to-day needs of their clients.” (Shay) In an effort to meet each customers needs WSI had a product mix of commercial insurance, personal insurance, and financial services. With only five years to complete the IPO, Kirby was asked to analyze the alternatives that could take Western States Insurance agency from 2002 revenues of $21 million, to $100 million, the amount investment bankers believed was viable for an IPO.
In order to...