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Private equity buyers dominate broker mergers and acquisitions in 2013


Last year produced an average number of insurance agent and broker mergers and acquisitions in North America, an encouraging sign after an unprecedented number of deals in 2012.

There were 248 deals in 2013, slightly more than the average number of 245 U.S. and Canadian mergers and acquisitions transactions per year from 2008 through 2012. The low point was 167 deals in 2009 and the high mark of 299 transactions came in 2012.

Despite the decline from 2012, which was not surprising given sellers' motivation to get deals done before the capital gains tax rate increased five percentage points to 20% in 2013, the second half of 2013 rebounded nicely from a sluggish first half of the year. Indeed, there were 76 deals in the October-through-December quarter last year.

The other significant factor driving deal activity in the agent and broker marketplace is the continued growth of the private equity-backed firms' appetite, with 2013 the first year in which private equity buyers led all groups. With 94 deals involving private equity last year vs. 85 involving privately owned brokerage firms, private equity buyers clearly have stepped up their activity. Insurance brokerages are attractive to private equity firms because they deliver a reasonably predictable cash flow with very little need for capital.

Last year, 16 private equity-backed buyers made 94 deals. In comparison, eight active publicly owned brokers made only 33 deals. While three private equity-backed firms — Hub International Ltd., Confie Seguros Insurance Services and AssuredPartners Inc. — had more than 10 transactions in 2013, only one publicly held broker — Arthur J. Gallagher & Co. — had more than 10 deals.

As a group, 63 privately owned buyers closed 85 transactions last year, second only to the 94 private equity deals for the year. Bank-owned agencies increased their buying level, from 24 deals in 2012 to 27 in 2013. However, nearly 20% of all bank deals were completed by Western Financial Group Inc., a wholly owned subsidiary of Desjardins Group. Still, bank-owned deals in 2013 trailed 2011 and 2008.


There were four major recapitalizations involving private equity firms last year. Due to the nature of these transactions, they are not treated as traditional M&As for this analysis. They were:

• Genstar Capital acquired GCP Capital Partners L.L.C.'s equity in Acrisure L.L.C. last March;

• Kohlberg & Co. L.L.C. replaced Berkley Capital's investment in Risk Strategies Co. in June;

• Hellman & Friedman L.L.C. replaced Apax Partners L.L.P./ Morgan Stanley Investment Management Inc.'s ownership position of Hub International in August;

• And Carlyle Investment Management L.L.C. took a controlling interest in Edgewood Partners Insurance Center Inc. from Stone Point Capital L.L.C. in November.

Three noteworthy traditional M&As closed in 2013. They were:

• Private equity firm Madison Dearborn Partners L.L.C. acquired National Financial Partners Corp. in April;

• Brown & Brown Inc. acquired Beecher Carlson Holdings Inc. in June from Austin Ventures, FSPM and a group of individual equity holders;

• And Gallagher acquired Bollinger Inc. in August from private equity-backer Evercore Capital Partners and other minority shareholders.

Publicly held brokers Gallagher and Brown & Brown were the most active buyers over the past five years, but private equity-backed Hub International eclipsed both during the past three years.

Of the 10 most active buyers in the past three years, five are private equity-based firms, although National Financial Partners was a public company until April 2013.

Although privately owned agents and brokers announced the most M&As during the three-year period, the total most certainly was significantly larger as the majority of private transactions are not reported or disclosed.


The past two years have been somewhat of a roller coaster on the agent and broker mergers and acquisitions front. The end of 2012 saw the highest number of deals in any quarter, followed by the second quarter of 2013 with the least number of deals since the dark days of the 2007 to 2009 Great Recession, which finally ramped up again at the end of 2013 to numbers comparable to 2008 and 2011.

Looking ahead, brokerage deal activity is likely to be robust. There are many active buyers with plenty of capital to spend and/or invest, coupled with a large number of baby boomer agency principals who need an exit and are ready to avail themselves of that pool of capital. In addition, it appears January 2014 was the most active January for deals in the past seven years.

Timothy J. Cunningham is managing director and Daniel P. Menzer principal at Chicago-based Optis Partners L.L.C., an investment banking and financial consulting firm that serves the insurance distribution industry. Mr. Cunningham can be reached at cunningham­@optisins.com. Mr. Menzer can be reached at menzer@optisins.com.