Broker M&A numbers dip in first quarter
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The number of mergers and acquisitions between insurance brokers fell in the first quarter as transactions involving multiple purchases evaporated, but it remains unclear how the COVID-19 pandemic is affecting deals, Optis Partners LLC said in a report Friday.
The Chicago-based investment banking and consulting firm said there were 137 transactions involving U.S. and Canadian brokers, managing general agents and third-party administrators in the first quarter, compared with 155 deals in the same period last year.
“The pace of insurance agency M&A activity in Q1 2020 was consistent with prior years, though there were no conglomerated transactions like those from Patriot Growth Insurance Services in 2019,” which announced 17 acquisitions on Jan. 1, 2019, the report said.
Buyer activity scaled back at the end of the first quarter, but “whether it was just normal quarterly timing or if it was the COVID-19 pandemic was unclear,” the report said.
The number of deals announced so far was the lowest first-quarter total since 2016, according to Optis.
Like last year, the most active buyers in the quarter were private-equity-owned brokerages or firms with significant outside financial support, with Caledonia, Michigan-based Acrisure LLC sealing the largest number of deals (see chart).
The most active publicly traded brokers were Arthur J. Gallagher & Co. and Daytona Beach, Florida-based Brown & Brown Inc., which both completed five deals in the first quarter.
Valuations for brokers and agents remain high, and it is unclear whether the economic effects of the pandemic will change the pricing and terms of brokerage M&As, the report said.
“With so many buyers dependent on private equity and lender financing, there is likely to be some level of capital restrictions imposed on the buyer community until the full effects of this pandemic have worked their way through the benefits and (property/casualty) revenue streams,” the report said.
