There were 280 announced and reported mergers and acquisitions for U.S. and Canadian insurance agents and brokers during the first half of 2018 compared with 333 in the same period 2017, a drop of nearly 16%.

Still, it represents the second-highest total of any six-month period on record, behind only the first half of 2017.

For the quarter, there were 135 transactions announced, down from the 147 reported in Q2 2017. While these numbers represent meaningful reductions in the number of M&A transactions, there have not been any signs of a drop in aggressive buyer behavior or willing sellers coming to the table, and 2017 was more of a blip in the deal pace than a repeatable performance.

Quarterly totals for 2018 have exceeded all prior quarters except for 2017.

Through the past six months, private equity/hybrid-backed Caledonia, Michigan-based Acrisure L.L.C. reported the most activity with 41 closed transactions, down from 48 for the same period last year. Chicago-based Hub International Ltd. was second, completing 33 transactions, up from 21 in 2017.

Consistent with what we have seen in recent years, the private equity-backed/hybrid group continues as the most active buyers, with eight of the top 10 in the group. Additionally, the concentration of acquisitions by the top 10 buyers continues to increase, responsible for 62% of the total announced transactions in 2018 compared with only 55% in 2017.

The PE/hybrid group accounted for 188 of the 280 total transactions thus far in 2018, or 67%. This ratio has been increasing steadily from approximately 37% in 2014. There were six new PE/hybrid buyers so far in 2018, although only one had more than one completed transactions.

In total, there were 27 separate buyers making up the PE/hybrid group in 2018.

Privately owned brokerage acquisitions held steady at 55 transactions from 44 separate buyers compared with the second half of 2017, but decreased from 82 transactions from 66 unique buyers in the first half of 2017. The private buyer totals from 2017 represent the highest number of both transactions and unique buyers from this buyer group. Of the 44 separate buyers in 2018, 26 were first-time buyers.

See adjacent chart for a summary of the different buyer-group activity since 2013.

Property/casualty brokers continued to dominate the sell-side M&A landscape, with 150 of the 280 year-to-date transactions, or 54% of the total, up slightly from brokers were acquired in 68 transactions, or 24%, down from 29% in 2017.

Through June 30, 2018, there were several significant transactions:

• Atlanta-based BB&T Insurance Holdings Inc. announced its acquisition of Memphis, Tennessee-based Regions Insurance Group Inc. in April, ranked as the No. 33 agency in 2017.

• Also in April, Newport Beach, California-based Alliant Insurance Services Inc. acquired New York City-based Crystal & Company.

• Two privately held agencies, Tacoma, Washington-based Propel Insurance (No. 48 in the 2018 Business Insurance broker ranking) and Chicago-based Ryan Specialty Group L.L.C., announced partnerships with private equity companies.

• Although not included in our totals, Acrisure completed its acquisition of London-based Beach & Associates earlier this year as its first transaction outside North America.

M&A activity in the insurance brokerage sector continues at a brisk pace, albeit short of the 2017 levels, with agency valuations and multiples reaching levels seldom seen before. And with new private equity-backed buyers still entering the picture, the demand for insurance agency acquisition opportunities is unlikely to wane any time in the near future.

Agency valuations from external buyers as seen over the past several years have created a material gap to internal agency perpetuation values, causing many baby-boomer and other agency principals to reconsider their long-term plans. However, with the diverse group of buyers in the marketplace today, agency principals can be very selective in what they want in a buyer and transaction structure while still taking advantage of current market conditions.

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 cunningham@optisins.com or 312-235-0081; Mr. Menzer can be reached at menzer@optisins.com or 630-520-0490.