There were 744 announced insurance agency mergers and acquisitions in 2020, an increase of nearly 20% from 649 reported in 2019. The increase was due to the pent-up supply of pending transactions from earlier this year combined with sellers offering an expected capital increase. wanted to avoid profits taxes.
Private equity buyers continued to dominate the activity. About half of all transactions involved salespeople from property / accident agencies.
According to an report by insurance consultancy OPTIS Partners, the 290 deals in the fourth quarter of 2020 were an increase of 68% from 173 in 2019. It was 61% more than the 180 transactions reported for the third quarter of 2020, when the country learned how to handle the pandemic.
The OPTIS data refers to US and Canadian agencies that primarily sell property / casualty insurance, agencies that sell both P / C and employee benefits, and agencies that only sell employee benefits.
“Most buyers continue to pursue deals unabated, although some withdrew somewhat from integrating acquired companies. New buyers also came online who have made significant progress with their acquisitions, ”said Steve Germundson, partner at OPTIS Partners, an investment bank and financial advisory firm specializing in the In insurance sector.
Buyer and sellers
The report divides buyers into four groups: private equity backed / hybrid brokers, private brokers, listed brokers, and all others. Sellers are classified as property / accident brokers, property / accident brokers and employee benefits brokers, benefits brokers and all others.
Acrisure continued to lead all buyers with 108 deals in 2020, which is in line with their four-year average of about 100 deals per year.
Other top buyers included Hub International with 64 acquisitions (up from 52 in 2019) and Broadstreet Partners with 58 deals (up from 34 in 2019), and top-ranked newcomer World Insurance Associates with 42 (up from 18 in 2019). ). Other buyers considered "most active" include PCF Insurance with 36 (instead of 6) and OneDigital with 29 (instead of 17 in 2019).
Several other historically active buyers saw their number of transactions drop slightly in 2020, including AssuredPartners, from 38 to 44, Gallagher from 34 to 23, and Hilb Group from 25 to 22.
The private equity backed / hybrid buyer group continues to dominate transaction volume at around 70% of the total. Acquisitions completed by private companies and listed companies were stable at 17% and 9% of all deals, respectively.
Sales office vendors accounted for 397 of the total of 774 transactions (51%), in line with their percentage of totals in recent years.
OPTIS thinks the M&A activity will also be important in the new year for several reasons.
“While it may not be as active as 2020, 2021 will likely be very active as a new wave of sellers looking to avoid an expected capital gains tax hike or simply sell with a growth story. Agency ratings and multiples for quality companies should continue to reach new upper limits as demand remains strong and supply from quality companies diminishes, ”said Tim Cunningham, managing partner of OPTIS Partners.
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