M&A

Pace of Deals Keeps Up for Insurance Brokers

There have been 344 insurance agency deals so far this year as low interest rates continue to drive the M&A market.
Matthew HellerOctober 19, 2016
Pace of Deals Keeps Up for Insurance Brokers

The pace of insurance broker mergers and acquisitions isn’t letting up as low interest rates and plentiful capital continue to fuel aggressive investing, particularly by private-equity backed firms.

According to a new report by the consulting firm OPTIS Partners, there were 344 insurance agency deals in the first nine months of this year, up from 338 in 2015, and 108 in the most recent quarter, up from 104 last year.

“Achieving organic growth is challenging [for brokers], so acquisitions are a key growth strategy for many firms, especially those backed by private-equity capital,” Timothy J. Cunningham, managing director of OPTIS, said in a news release.

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Private-equity backed buyers continue to drive the M&A market, again accounting for more than 50% of all reported transactions. One of those firms, Acrisure, was again the most active buyer, with 50% more deals than its closest competitor this year alone.

So far this year, there has been a slight increase in acquisitions by privately owned broker groups, more slippage in the public broker activity levels, and a 50% increase in acquisitions by banks.

Other than One Digital, which is owned by Fidelity National Financial, and publicly-traded Gallagher, all of the other Top 10 buyers are private-equity backed.

As far as sellers, property-casualty agencies continued to be the focus of acquisitions, accounting for 53% of the deals year to date, while sales of employee benefits brokers have picked up, reaching 19% of the total.

“The M&A marketplace continues to be very active with no end in sight,” the report said. “Interest rates remain low, and money is plentiful for buyers to continue aggressively investing in the insurance broker community.”

But OPTIS partner Daniel P. Menzer cautioned that “This period of insatiable buyer appetites and aggressive pricing won’t last forever. If you are a potential seller, consider acting sooner than later while the irons are hot and the pricing is favorable.”

“If you are a buyer, make sure you are doing your homework on the potential seller and have fully evaluated their risk and growth potential,” he added.