Buying or Selling an Investigation Agency: The Complete Guide

Buying or selling an investigation agency comes down to files a buyer can still work, a license a successor can hold, and a lead investigator who can close the next case when you are not on it. What trades is transferable cash flow after a real investigator wage, invoices that match the bank, and client relationships that are not only your name. A firm on an insurer's panel, a shop that works for law firms, and a one-person practice that takes individual matters are different companies. Price a busy month of one-off cases as if it were a retainer and you will use the wrong multiple.

The short answer: an owner-operated investigation agency, where you are still the licensed investigator and often the person the client calls, often trades around 2x–3.5x Seller's Discretionary Earnings (SDE) after a real investigator wage. A firm with another licensed lead already signing reports, written engagements, and a license path a buyer can hold can move toward 2.5x–4x SDE. A managed firm with panel work and more than one licensee can be read on adjusted EBITDA. Those ranges are directional. They are not a quote. This is not a law practice. Attorney clients are customers. The practice of law is a different file, covered in the law firm guide.

This guide is for investigation agencies — licensed private investigation firms that take engagements from insurers, attorneys, employers, and individuals. It is not a guard company and it is not an alarm company. Staffed posts are the security guard guide. Cameras and monitoring are the security systems guide. An investigation firm sells a report and a licensed file, not a shift and not a monitoring account.

Firms that sell well have engagements that match the invoices, a second licensee, retainers reconciled to open files, and a license that is not only the owner. Firms that sell poorly are a founder who still works every case, one carrier at half the year, and unearned retainers already spent.

This article is not legal, licensing, tax, or privacy advice. Who may hold an investigation license, what a report may include, and what a file must keep change by state. Confirm them with qualified counsel before you sign a letter of intent. Nothing here is a method for conducting an investigation.

Start with a confidential business valuation or the service-business guide.

Why an Investigation Agency Is Different

An investigation agency sells a licensed file and a report a client will rely on. Several facts change the price:

• The license is the right to take the next case. If the qualifier is you and you are leaving, the buyer may be buying a phone list. Say so before you multiply last year.
• You may be the only name the adjuster or the attorney will call. If every new file and every hard question waits for you, that is key-person risk. A transferable firm has a licensee who has already closed a file you did not work.
• Unearned retainers are not revenue. Money collected before the work is done is a liability until the file is earned. Buyers will tie every dollar to a matter.
• Case files are confidential. A buyer needs enough to underwrite the book. The client did not agree to a data room full of raw personal information. Plan what counsel will allow a buyer to see.
• A panel appointment and a one-off individual matter do not share a cycle. Split insurer and attorney work from individual engagements.

Who Pays: Insurers, Attorneys, Employers, and Individuals

Insurers and attorneys

Insurers and attorneys are the business-to-business file. A carrier panel, a defense firm, or a plaintiff firm that sends a steady set of files. One carrier or one firm at a third of the year is concentration. Ask, before you list, whether they will keep a new name and whether the panel appointment is personal. The answer belongs in the letter of intent. A firm in Florida and a firm in Texas, Georgia, or Ohio can both be real revenue. Put the engagement terms in the file. Do not write the market as one state's statute.

Employers and individual clients

Employers and individuals are the other file. A company that wants a background review it is allowed to run, or a person who hires the firm for a single matter. Individual work is closer to a consumer sale: it must be resold, it is sensitive, and it often depends on the owner the client met. Do not treat a month of individual matters as a retainer. If you also place people or run employment screening as a separate product, keep that revenue apart from investigation files. A staffing agency is not this company.

Main Street versus a lower-middle-market firm

Main Street is you, the license, and a book of files in your name. Price it on SDE. Lower middle market is another licensed investigator, a case manager who is not you, and panel or law-firm work that does not arrive only because of your phone. That file can be read on adjusted EBITDA. Do not price a solo investigator like a multi-licensee firm.

What Buyers Underwrite

Files, billings, and the mix

Files, billings, and the mix are the proof. Buyers want twelve to twenty-four months of matters by client type, with the fee, the hours, and what was collected, tied to the bank. A month of trial support you annualized is not the run rate. Write-offs, files you opened and did not bill, and subcontractors you paid outside the books come out before anyone talks about a multiple.

Retainers, engagement letters, and open matters

Retainers, engagement letters, and open matters are the book. What is earned, what must be finished or refunded, and which files the buyer is actually taking. An open matter with a deadline is work, not goodwill. A retainer already spent on overhead is not cash the buyer is purchasing. Counsel should decide what a buyer may read. A sale does not waive a client's confidentiality.

The license, insurance, and subcontractors

The license, insurance, and subcontractors are the right to accept the next file. The company license, the qualifying investigator, and errors-and-omissions coverage the clients already expect. Investigators you treat as contractors may be recast by a buyer and a lender. This is not a legal opinion on classification. It is a statement that the price moves if the labor cost was missing, or if the only person who can sign a report is leaving. SBA 504 is rarely the point. The asset is the license and the book, not a plant. 7(a) is the usual conversation when a second licensee and the client path are real.

Reports, work product, and complaints

Reports, work product, and complaints are the surprise. A report a client rejected, a file still open past its deadline, and a complaint in front of the licensing board. Buyers will ask. An agency that looks profitable because it skipped insurance or a second licensee's wage will not pass a lender's recast.

How Sellers and Buyers Should Read the Multiple

Use SDE when the owner is still the investigator on the file. Add back only costs a buyer will not keep, and only after a market wage for the qualifying investigator and anyone who manages cases. The valuation guide is the method. A trial month is not the monthly average. A panel that can be cancelled, or an appointment that is personal, is not a five-year contract. Recurring law-firm or carrier work with a second licensee can be read more cleanly than a book of one-off individual matters.

Getting the File Ready

Twelve to thirty-six months is the useful window. The sale-prep roadmap is the sequence. For an investigation agency, the work is specific: a second licensee on files you do not work, retainers tied to matters, engagement letters a buyer can see in summary, and insurance that does not end when you leave. Keep the process quiet. A carrier or a law firm in the middle of a panel review will worry if they hear about a sale from a post. The confidential sale guide is the rule. Client files need a tighter rule than a normal data room. Ask counsel what may be shown.

Who Buys an Investigation Agency

A licensed investigator who wants the book, a firm entering a state, and a buyer who already holds the license there are the usual buyers. They do not underwrite the same file. The individual needs a license path, SBA if the earnings support it, and sometimes seller financing. The 7(a) cap is $5 million. The strategic buyer will ask whether the panel, the law firms, and the second licensee stay. A service-business sale fails when the only person who can sign the report is you. Work you do only because you also hold a law license belongs in the law firm guide, not in this multiple.

Diligence, Financing, and the First Ninety Days

Diligence is engagement summaries, tax returns, the retainer list, the license file, insurance, and a client list by type without dumping raw case contents into a room. The diligence guide is the calendar. Expect a lender to recast a wage you never paid, a subcontract you called a vendor, and a busy trial month. Working with an SBA lender means the invoices match the bank and the license path is real.

A holdback shows up when the qualifier is you or one client is the year. Tie it to a date and to files that actually bill after closing. The earn-out note is the structure. A firm that cannot open Monday's file without you is a license with a desk.

What Moves the First Offer

Unearned retainers, a license that is only you, and one carrier treated as permanent belong in the letter so the price is for work a buyer can still accept. Name the second licensee, the wage, and the files they already sign. A buyer who has not met that person will price a hire, or will walk. Put the largest panel or law firm next to that name. Two years by month keep a trial calendar from becoming the run rate. Include complaints, insurance limits the clients already require, and engagements that end when you do.

A buyer who has read a redacted file once will still ask who signs the next report, which clients can leave, and which license the company holds. Answer with a name, a matter list that does not expose the client's secrets, and the license file. Carrier work, law-firm work, employer work, and individual matters should be four lines, not one blended margin. A one-off individual case is not a panel. A firm in Florida and a firm in Texas, Georgia, or Ohio can both be real work. The file is the engagement and the license, not the state on the door.

A retainer you already spent, a subcontractor you still owe, and a report a client sent back belong on the list before anyone multiplies last quarter. Name the person who already closes a file without a call from you, and put the open matters that person can finish beside that name. The first offer moves when the billing report ties to the bank and the second licensee is the one the client will still call.

Talk With Bridge Point

If you are preparing to sell an investigation agency — or you are a buyer who can hold the license and staff the files — Bridge Point Business Brokers can help you value the book and the license path separately, and keep the process confidential. Start with a valuation or contact us at (352) 515-0226.