Agency M&A Breaking Records at Breakneck Speed

Mergers and acquisitions of insurance agents and brokers last year broke several records in 2018, according to OPTIS Partners’ annual report. OPTIS logged a record 626 deals in the United States and Canada in 2018, including 330 transactions in the second half of the year and 148 transactions during the fourth quarter.

There were 611 M&A deals in 2017, previously the most active year. The report covers firms selling primarily property-and-casualty insurance, both P&C and employee benefits, and employee benefits agencies. Private equity/hybrid buyers accounted for 424 transactions, representing 68 percent of the total, compared with 383 transactions and 63 percent in 2017.

The top five buyers were Acrisure (101 acquisitions), Hub International (59), AssuredPartners (37), Gallagher (36) and Broadstreet Partners (34). All were in the PE/hybrid category except publicly owned Gallagher.  Privately owned firms completed 107 transactions in 2018, down from 137 acquisitions in 2017. This was the first decrease from this group since 2013.

By seller type, property-and-casualty-focused agencies dominated the list. They accounted for 345 of the 2018 transactions, 55 percent of the total. Employee benefits brokers accounted for 146 transactions, 23% of the total, but were down from the 174 recorded in 2017

There were 142 unique buyers in 2018, down from 177 in 2017 and the lowest total since 2014. At the same time, the top 10 buyers in 2018 accounted for 62 percent of the number of transactions compared to only 56 percent in 2017 and 52 percent in 2016.

Some key takeaways from this year’s results include the following, according to Daniel P. Menzer, OPTIS partner:

• Buyers continue to find attractive agencies to acquire

• Agency valuations continue to creep upwards, pushing revenue and EBITDA multiples to levels seldom if ever seen before

• Internal perpetuation is a challenge because of the increasing gap between the value third-party buyers are willing to pay and internal transaction values. Many owners find these values very compelling.

• Equity and debt capital remain plentiful to fund PE/hybrid buyers.

• Finally, as we’ve said in the past and strive to reinforce every day with our clients:

– If you’re a buyer, pay attention to cash flow and be careful not to overpay.

– If you’re a seller, identify the best cultural and operational fit. Take advantage of strong pricing before things change.

– If you’re neither, ignore all the hype and run your business like a business and strive for improvement every day.

The OPTIS database tracks a consistent pool of the most active acquirers and other announced transactions, and is, therefore, a reasonably accurate indication of deal activity in the sector.

“The actual number of agency acquisitions was far greater than the number reported, as many buyers and sellers do not report transactions, and some acquirers do not report small transactions,” Timothy Cunningham, OPTIS Managing Director said.

The full report, 2018 Agent & Broker Mergers & Acquisition Update, can be read online at http://optisins.com/wp/2019/01/december-2018-ma-report.

OPTIS (www.optisins.com) is an important M&A firm.

Contact: Tim Cunningham, OPTIS Partners, cunningham@optisins.com, 312-235-0081
Dan Menzer, OPTIS Partners, menzer@optisins.com, 630-520-0490
Henry Stimpson, Stimpson Communications, 508-647-0705, Henry@StimpsonCommunications.com