Deals for P&C and benefits brokers in United States and Canada are down this year, but last two quarters have bucked the trend, OPTIS Partners reports
CHICAGO, IL / ACCESSWIRE / October 24, 2024 / There were 535 announced insurance agency mergers and acquisitions through three quarters of 2024, down 10% from 594 in the same period in 2023, according to OPTIS Partners' M&A database. Deal activity is now 11% below the previous five-year average.
"Nevertheless, we've seen two quarters of increasing deal count after six consecutive quarters of the count falling," said Steve Germundson, a partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry. "While two quarters do not a trend make, we believe that we're at or near the bottom of the deal-flow trough."
In Q3, 198 deals were announced, up 14% from 173 in Q2 and up 21% from 164 in Q1.
OPTIS managing partner Timothy J. Cunningham added, "Some may call the deal flow today as the ‘new normal' though we're more likely to call it the ‘old normal.' Deal volume is still off from the peak, but it is also still above pre-2021 flow."
Private equity-backed/hybrid brokers dominate buyer group
The report breaks down American and Canadian buyers into four groups:
private equity-backed/hybrid brokers
privately held brokers
publicly held brokers
all others.
The private equity-backed/hybrid group of buyers maintained its dominance with 73% of all acquisitions for the quarter, while transactions between private parties accounted for 17%. Publicly held brokers and all others accounted for just 10% of deals.
Among the most active buyers in 2024, BroadStreet Partners led the industry with 68, which is 51% higher than what it recorded in the same period last year and twice its previous 5-year average.
Hub and Inszone followed with 39 and 38 deals, respectively. While Hub's pace of deal-making is 13% below the prior year, Inszone's pace has increased significantly each year since 2020 when it did four deals. Patriot Growth rounded out the top four and nearly doubled its transactions over the prior year.
There were 87 unique buyers in insurance-distribution-related businesses through the first three quarters of 2024, 71 of which did fewer than ten transactions and 41 of which did just one. Twenty-five of these firms announced their first acquisition.
The 10 most active acquirers accounted for 292 deals (55% of the total). All of these were private-equity-backed firms other than Leavitt Group (private) and Arthur J. Gallagher (publicly traded).
P&C agencies most often bought
The report covers four types of sellers:
property-and-casualty insurance agencies
agencies offering both P&C and employee benefits
employee benefits agencies
all other sellers (life/financial services, consulting and other businesses associated with insurance distribution).
P&C sellers accounted for 349 transactions (65% of the total). Benefits agencies sales totaled 75 (14%), and there were 52 sales of P&C/benefits agencies (10%). All other sellers accounted for 59 sales (11%). Firms that fall into the life insurance/financial services area are included in the "other" category and did 18, or 3%, of the total transactions.
"We continue to see a large number of potential sellers in the industry, both long-established agencies owned by baby boomers as well as those that started up in the last five to 10 years. That certain level of regeneration is an interesting dynamic, and often those firms are showing real organic growth," Germundson said. "A stabilizing economy is also empowering buyers, both established and those looking to enter the market."
Cunningham pointed out: "We see more significant changes in the buyer community to come. On the heels of some large acquisitions in 2024 such as AON's purchase of NFP and Marsh McLennan Agency's announced acquisition of McGriff Insurance Services, we look for more large deals to be announced as the big firms chase growth."
In addition, there likely will be several recapitalizations of private equity-backed firms following in the footsteps of Axis Insurance Managers and Sunstar Insurance Group earlier in 2024, he predicted. Most likely a couple more agencies will be going public, as The Woodlands Financial Group did earlier this year.
The full report can be read at https://optisins.com/wp/2024/10/q3-2024-ma-report.
Focused exclusively on the insurance-distribution marketplace, Chicago-based OPTIS Partners (www.optisins.com) offers merger & acquisition representation for buyers and sellers, including due-diligence reviews. It provides appraisals of fair market value; financial performance review, including trend analysis and internal controls; and ownership transition and perpetuation planning.
Contact:
Steve Germundson, OPTIS Partners, germundson@optisins.com, 612-758-0598
Tim Cunningham, OPTIS Partners, cunningham@optisins.com, 312-235-0081
Dan Menzer, OPTIS Partners, menzer@optisins.com, 630-520-0490
Henry Stimpson, Stimpson Communications, Henry@StimpsonCommunications.com
SOURCE: OPTIS Partners
View the original press release on accesswire.com
