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An active insurance broker mergers and acquisitions market should produce a second consecutive year of more than 500 transactions as valuations rise, according to a report released Wednesday by analyst advisory firm Marsh, Berry & Co. Inc.
There have been approximately 289 deals through the end of July, according to data from S&P Global Market Intelligence, putting 2018 on pace to top 500, according to MarshBerry Executive Vice President Phil Trem in Woodmere, Ohio.
Last year saw a total of 557 deals, according to the data, the only year with more than 500 transactions since 2005, the first year for which such data is shown.
Private equity-backed broker consolidators topped the list of those firms with the most transactions, according to data from MarshBerry. Other acquirers included public and independent insurance brokers, as well as banks and thrifts.
Assured Partners Inc. and BroadStreet Partners Inc. each had 19 deals, followed by Alera Group Inc. with 18, Acrisure LLC with 17 and Hub International Ltd. with 16 deals.
The prices paid for target companies is also getting richer, MarshBerry said.
“The average base purchase price, as of the 12 months ending June 30, 2018, has exceed (eight times) earnings before interest, tax, depreciation, and amortization (‘EBITDA’) for the first time in our records,” wrote Mr. Trem in the report, adding, “Demand for quality firms is helping drive the activity and values.”
Rising interest rates and tax reform may slow the market’s roll and lead to a decline in valuations, “but the timing of when this will occur is still anyone’s guess,” the report said.
The report also noted that during the first half of the year, five of the top 100 brokers completed sales. “We expect this number to rise before year end,” the report said.
Insurance broker merger and acquisitions continued apace in the United States and Canada in the second quarter of 2018, but at a slower rate than the same period last year, according to an Optis Partners L.L.C. report.