Brown & Brown paid up to $730M for Hays with $25M earn-out over three years. Every earn-out metric was met and the full $25M was paid. That scores the 2018–2021 price structure — not seven-year retention on the same book.
Precedent IBR-001. Pair with IBR-003 — same Hays asset, retention-protection judgment, different clock.
Bottom Line
Up to $25M of the $730M price sat in a three-year earn-out. That left retention and growth risk with the seller through the integration window. Jim Hays stated under oath in a December 2025 affidavit that they exceeded all earn-out metrics and received the entire $25 million.
Earn-out success is not a seven-year retention verdict.
Historical Conditions
- 2018-10-22: Brown & Brown agreed to buy Hays Companies — then #22 U.S. insurance broker, 700+ employees, 32 locations in 21 states.
- 2018-11-15 close: $705M ($605M cash + 3,376,103 BRO shares at $100M) plus up to $25M cash earn-out over three years. Roughly $600M borrowed under the credit facility.
- Fed target 2.00–2.25% at signing; 2.25–2.50% from 2018-12-20. Management guided — Business Insurance report, not audited — to 2017 gross revenue $199.1M and 2019 revenue $210–220M on $47–53M EBITDAC.
Judgment
Pay $730M for Hays — $705M at closing plus up to $25M of earn-out — funded largely with credit facility borrowings, treating the retained producer force as the asset being bought.
Reconstructed from 8-K terms and management commentary. No published multiple from Brown & Brown in this form.
Reasoning
- Deferring $25M shifted retention/growth risk to the seller for the integration window instead of putting it all in upfront cash.
- Implied multiple uses guided 2019 EBITDAC ($47–53M), not a reported multiple. Trade press $750M is not the filing figure.
- ~$600M facility debt was serviceable at Fed 2.00–2.25%. Cheap financing was a condition of the price.
Outcome
Verdict (scoped): success — 2018–2021 earn-out period only. All metrics met. Full $25M paid.
What went right: Targets cleared each year. Deferral paid only against delivered performance.
Limits: Verdict rests on the affidavit sentence about earn-out attainment. No public Hays-level revenue/margin series after close to audit anything finer.
Next-time rule: Score earn-out success against intangible amortization life, not only earn-out tenor. Track founder and top-decile producers at years five and seven.
What Still Holds
- Earn-outs can push near-term retention/growth risk to the seller.
- 2018 cost of debt helped make this price workable.
- Buying a producer force as the asset remains a common brokerage thesis.
What Changed
- By 2025 the same book faced a coordinated departure episode (IBR-003).
- Later financing conditions inverted. Do not paste 2018 debt cost into a current underwriting without re-scoring.
Transfer Caution
- Earn-out success ≠ seven-year retention.
- Do not say the Hays deal “worked” in full from this page alone.
- Do not bury IBR-003 behind a short success window. Same asset, different judgment.
- Use $705M + up to $25M, not trade-press $750M.
Provenance
- Brown & Brown 8-K — Hays announcement (2018-10-22)
- Brown & Brown 8-K — closing / Project Apollo (2018-11-15)
- Business Insurance — Q3 2018 call / Hays details
- Affidavit of Jim Hays (Dec 2025)
- Federal Reserve — target range history
Fixture IBR-001. Source draft: docs/evidence/hays-earn-out-success.md.