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LAKE MARY, Fla.—A recent acquisition of a regional broker aiming to expand its reach nationally could signal renewed interest by private equity firms in buying intermediaries.
Neace Lukens Holding Co., a Louisville, Ky.-based broker, announced last week that it was being acquired by AssuredPartners Inc., a Lake Mary, Fla., company backed by up to $250 million in capital from Chicago-based private equity firm GTCR L.L.C.
Neace Lukens, with 2010 revenues of $86 million, was ranked 24th in Business Insurance's annual list of the largest brokers of U.S. business. The brokerage confirmed that it plans to use funds from the deal to expand its regional presence to become a nationwide firm.
Terms of the deal were not released.
AssuredPartners, formed this year, is led by CEO Jim Henderson, the former vice chairman and chief operating officer of Daytona Beach, Fla.-based broker Brown & Brown Inc. Tom Riley, former regional president and chief acquisition officer at Brown & Brown, is president and COO of AssuredPartners, which was created to build a middle-market brokerage operation through investments in property/casualty and employee benefits brokers.
Retail and wholesale brokers have been targets of private equity firms for some time. A flurry of deals were completed in 2007, but transactions slowed during the credit crisis.
Among the 20 largest brokers in BI's ranking, Hub International Ltd., USI Holdings Corp. and Alliant Insurance Services are owned by private equity firms.
Sources say a firming commercial market could stir private equity firms to step up their efforts to acquire brokers.
“We are seeing increased private equity interest,” said Bobby Reagan, president and CEO of Reagan Consulting Inc. in Atlanta. The firms slowed their acquisition activity after making notable investments in Hub, USI and Alliant, he said, but are optimistic that market trends are improving and brokers are well-positioned.
“The brokerage business is attractive because the cash flow is reasonably predictable,” said Timothy J. Cunningham, a principal at OPTIS Partners L.L.C. in Chicago. It's a business that operates without the burden of requiring “major capital investments like in the manufacturing sector,” he said.
In addition, brokerages look to be better investments as the soft market appears to be firming, Mr. Cunningham said. “There is some anticipation that will we see a market shift. I think we are at the bottom of the market.”