Insurance broker M&As explode in first quarter

Insurance broker mergers and acquisitions reached record levels in the first quarter of 2017 with 178 deals announced, according to a report issued Wednesday by Optis Partners L.L.C.

That compares with 115 deals in the same quarter of 2016, the Chicago-based investment banking and financial consulting firm that serves the insurance distribution sector said in the report.

The 2017 quarter included the formation of Alera Group, a new private-equity backed firm that closed 24 separate deals on Jan. 1. “Notwithstanding this unique transaction, the number of (first-quarter) transactions would still have out-paced any previous quarterly period,” the report said.

As has been the case for most quarters over the past several years, private-equity backed brokerages announced the most transactions in the quarter with 93, followed by privately held firms with 49 and publicly held firms with 17.

The most active acquirer was Acrisure L.L.C. with 29 deals in the first quarter, followed by Alera with 24, BroadStreet Partners Inc. with 10, Arthur J. Gallagher & Co. with 10 and Hub International Ltd. with eight.
The report highlighted six major transactions in the first quarter:

• Marsh McLennan Agency L.L.C.’s January purchase of J. Smith Lanier & Co., which was ranked the 30th-largest broker of U.S. business in Business Insurance’s latest ranking.

• Canadian broker Western Financial Group’s sale to Wawanesa Mutual Insurance Co. in February.

• NFP Corp., ranked 11th by Business Insurance, received a capital infusion of $750 million from HPS Investment Partners L.L.C. to join Madison Dearborn Partners as the private equity sponsor in February.

• Keenan & Associates, ranked 22nd, was acquired by AssuredPartners Inc. in March.

• Capacity Group of Cos., ranked 39th, sold its retail operations to EPIC Insurance Brokers & Consultants in March. 

• USI Insurance Services L.L.C.’s private-equity partner, Onyx Corp., announced in March it would be selling its stake in USI, ranked ninth, to Kohlberg Kravis Roberts & Co. L.P. and Montreal-based pension fund Caisse de dépôt et placement du Québec in a transaction valued at $4.3 billion.

“By all measures, 2017 will likely be another banner year for M&A. Most indicators are positive or trending positive,” the report said.

Brokerage buyers remain “willing and able to aggressively pursue acquisitions,” and new private-equity capital continues to flow into the brokerage sector. However, “it will very likely change at some point to more reasonable valuations and transaction activity,” the report said.