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In 2021, mergers and acquisitions hit a fifth straight record year in the insurance distribution sector, with 798 transactions announced as of Jan. 3, 2022, a 12.2% increase compared with the 2020 announced deal total of 711, financial analysts MarshBerry Inc. said Friday.
Private-capital-backed buyers accounted for 591 of the 798 transactions, 74.1%, and continue to expand their presence in the marketplace, with total deals by these buyers increasing at a compound annual growth rate of 14.8% since 2018.
“Buyers and investors are continuing to push their way into the marketplace. It is a very favorable seller’s market because there is still more demand than there is quality supply,” said MarshBerry.
That demand helped push up transaction pricing as valuations saw another increase through the end of the year to over 10 times earnings before interest, taxes, depreciation and amortization, an increase of 12.9% over the upfront proceeds that sellers received in 2020. The total maximum purchase price has increased more than 11% year over year in 2021.
Independent agencies, meanwhile, accounted for 100 deals, or 12.5% of the total deal count. While this proportion is consistent with 2020, this portion of the total announced transactions has seen an overall decline from the 2015-2020 average of 23.2% of deals done by independent agencies.
One principal factor helping drive transactions is the decision by brokers to upgrade – with added technologies or services, for example – to meet what MarshBerry says is an expanding set of buyer demands, or sell out. “The build versus join decision is bringing a lot of firms to the deal table. This dynamic is not going away.”
MarshBerry expects deal activity to continue to be robust in 2022, although it may not set another record. “While the 2022 deal count will not necessarily eclipse the 2021 total, activity will likely remain at the 2019/2020 levels with somewhere between 650-750 announced transactions.”
While the proposed acquisition of Willis Towers Watson PLC by rival Aon PLC was eventually scrapped, 2020 was a significant year of change in the brokerage landscape, with the most mergers and acquisitions activity in the past five years. In fact, nine out of our 20 brokers to watch from last year moved into the Top 100. As a result, we have an open call inviting new participants to our annual broker survey.