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Private equity buyers drive surge in deals as brokerage acquisitions accelerate


Mergers and acquisitions of insurance agents and brokerages in the United States and Canada set fresh records in 2015 in deals pushed by strong valuations and ongoing private equity interest.

A total of 451 deals were announced or reported in 2015, up from the previous record of 357 in 2014.

Private equity-backed buyers were involved in 242 acquisitions, while property/casualty agents and brokers accounted for 255 sellers.

Total agent/broker transactions in 2015 rose about 26% compared with 2014. Private equity-backed buyers made 242 deals, a roughly 53% jump. This group was responsible for about 54% of all 2015 deals, up from 44% of the total in 2014 and only 21% in 2008.

There were 148 separate buyers in 2015, more than any year since 2008. The biggest change was the dramatic expansion of activity of the private equity-backed buyers, with an average of more than 12 deals per firm compared with less than four per firm in 2008.

The buyer group’s sheer volume of activity is creating the demand for acquisitions, and appears to be pushing pricing and valuations to newfound highs.

Among buyers, Caledonia, Michigan-based Acrisure L.L.C. was No. 1 in 2015 with 56 closed transactions, up from 22 in 2014. Lake Mary, Florida-based Assured Partners Inc., with 38 deals, and Chicago-based Hub International Ltd., with 37 transactions, rounded out the top three, all of which are private equity buyers.

Publicly traded brokers Arthur J. Gallagher & Co., in fourth place with 27 deals, and Brown & Brown Inc., in seventh place with 12 transactions, were the only non-private equity-backed firms in the top 10 buyers for 2015.

Publicly traded and privately held brokers reported fewer deals in 2015 while banks and buyers in the “other” category increased the deals they made.

Agents and brokers focused on property/casualty coverage continue to be the primary acquisition targets, accounting for about 56% of all deals last year. While sales of brokers focused on employee benefits and those offering property/casualty and employee benefits services increased last year, their share of total M&As dropped to 17%.

Significant deals in 2015, which do not include international acquisitions, included:

• The merger of Willis Group Holdings P.L.C. and Towers Watson & Co. was announced in June 2015, which established Willis Towers Watson P.L.C. and became effective in January 2016.

• Stone Point Capital L.L.C., Greenwich, Connecticut, took a “significant” undisclosed stake last June in Newport Beach, California-based Alliant Insurance Services Inc. to join New York-based Kohlberg Kravis Roberts & Co. L.P. as the largest institutional investors in Alliant.

• Arthur Gallagher purchased William Gallagher Associates Insurance Brokers Inc. last June.

• Integro Ltd., New York, consolidated its equity backers to New York-based Odyssey Investment Partners L.L.C. in November.

• Marsh & McLennan Agency L.L.C. brought MHBT Inc., Dallas, last June and and J.W. Terrill Inc., St. Louis, in July.

• Atlanta-based Prime Risk Partners Inc. made its first acquisition in purchasing Cook Maran & Associates Inc., East Hampton, New York last June.

Expectations for the near-term future are for a continuation of the current M&A environment — barring significant financial, political or economic events that may change the underlying market. The U.S. economy continues to move forward. Insurance prices are softening, but not significantly, and are being offset to some degree by growth in exposures and coverage. Interest rates are still at historic lows, but have slowly started the increase many have been expecting and will likely continue to move up over the next several years.

While there is no belief the brokerage M&A bubble will burst or slow in the near term, the current valuation levels may not be sustainable. Whether private equity investors fail to achieve their expected returns or buyers simply can’t afford sellers’ prices, at some point the valuations will come back to some degree of normalcy.

If you are a buyer, caution may be appropriate. If you are a potential near-term seller, consider getting on the bandwagon sooner rather than later, before it changes course.

Timothy J. Cunningham and Daniel P. Menzer are principals at Optis Partners L.L.C., a Chicago-based investment banking and financial consulting firm that serves the insurance distribution sector. Mr. Cunningham can be reached at 312-235-0081 or, and Mr. Menzer can be reached at 630-520-0490 or