Brokerage mergers and acquisitions continued at a steady rate over the past 12 months, and few in the industry expect a slowdown in deals anytime soon.

Growing interest from private equity investors in the brokerage sector will likely continue to drive deal volume, experts say.

And while the outcome of the largest ever proposed broker deal remains unclear, the regulatory review process is providing insights.

Among the brokers in the Business Insurance 100 Largest Brokers of U.S. Business ranking, more than 40 reported acquisitions last year, and several firms saw triple-digit revenue growth, largely on the back of multiple deals (see chart).

Many of the most active buyers continued their M&A strategies last year and have accelerated their purchases in 2021 (see related story) 

“There’s more than 20 private equity insurance broker roll ups, which creates an incredibly competitive market for any broker target,” said C. Gregory Peters, St. Petersburg, Florida-based managing director, equity research, at Raymond James & Associates.

The brokerage sector will likely continue to see substantial numbers of mergers and acquisitions, said Meyer Shields, Baltimore-based managing director at Keefe, Bruyette & Woods Inc.

Larger brokers have more influence on the market and can obtain better deals for some clients and for themselves and can have more resources available to clients than smaller rivals, he said.

“Overall, the M&A market is back to where it was,” said Joe Marinucci, New York-based senior director at Standard & Poor’s Global Ratings.

While there was a lull in 2020 due to a concern regarding the “visibility on valuations,” deals were made, he said. 

“What we are seeing now is a migration back to the way (the M&A) market was and that upward trend line, high valuations and deal pace still moving at a fairly meaningful clip,” Mr. Marinucci said. 

Capital remains available to support M&A activity, said Francesca Mannarino, associate director in New York with S&P Global Ratings.

“S&P expects broker M&A to remain strong for 2021, potentially stronger than 2020,” she said.

While time will tell whether Aon PLC’s proposed purchase of rival Willis Towers Watson PLC will pass regulatory muster, the review process is providing some insights into the thinking of regulators regarding an industry that seldom has antitrust concerns, analysts say.

If the antitrust suit filed by the Department of Justice seeking to block the deal goes to trial, the judge’s decision could set the boundaries on broker M&As, said Mark Dwelle, director, insurance equity research, at RBC Capital Markets LLC in Richmond, Virginia.

“If ultimately it doesn’t happen, what the judge will tell us effectively is how large these companies are able to be,” he said.