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After a surge in broker mergers and acquisitions activity in 2020, a veritable tidal wave hit in 2021, as the total number of deals done increased by 30% to 1,034, yet another record.
These totals include U.S. and Canadian property/casualty and employee benefits brokerages, third-party administrators and related managing general agent operations, but it does not include agencies solely focused on life insurance, investment or financial management. We collect the information from public announcements, buyer websites and other sources in a consistent manner from year to year, but it does not include all transactions, as many are never disclosed publicly.
The 384 reported fourth-quarter transactions were by far the largest quarterly total on record, fully 26% more than the next largest in Q4 2020 when 305 transactions were recorded. During the second half of 2021, there were 674 transactions reported, compared with 488 for the same period in 2020. To put this into context, the number of deals done in the last six months of 2021 was greater than any 12-month period through mid-year 2020. Buyer appetite remains as large as ever going into 2022, and we don’t expect that to change, even if there is a noticeable rise in interest rates. The biggest limiting factor to deal volume in 2022 is likely from the seller side as those who had been contemplating a sale over the past two years most likely took action before the close of 2021.
Buyers are broken down into the following categories:
Grand Rapids, Michigan-based Acrisure LLC reported the most activity, with 122 closed transactions, an increase from the 108 transactions completed in 2019. Acrisure has averaged 104 agency purchases each year for the past five years. It’s notable that Lehi, Utah-based PCF Insurance rivaled Acrisure as most acquisitive when it nearly tripled its deal volume in 2021 to 99 transactions.
The PE/hybrid group remains the most active group of buyers, occupying each of the top 10 spots in the table above and a whopping 787 of the 1,034 deals for the year, or 76% of the total. The concentration of acquisitions by the top 10 buyers — as measured in each year independently — was 57% in both 2021 and 2020. In addition to PCF noted above, buyers that stepped up their activity significantly in 2021 included Traverse City, Michigan-based High Street Partners, up 522%; Walnut Creek, California-based Relation Insurance Inc., up 200%; and Deerfield, Illinois-based Alera Group, up 150%. Both PCF and High Street Partners recapitalized last year. Atlanta-based Digital Insurance Inc., which does business as OneDIgital, fell out of the Top 10 from 2020 yet still completed 20 transactions during 2021.
Some other statistics from 2021 activity:
Property/casualty brokers continued to dominate the sell-side M&A landscape, with 547 of the 1,034 transactions, or 53% of the total. Employee benefits brokers were the second most acquired companies in 2021, with 178 transactions representing 17% of the total.
There were 18 companies whose revenue exceeded $30 million sold during 2021.
There were also several investments and recapitalizations of PE/hybrid-backed active buyers, including:
While it’s hard to imagine that the activity in 2022 will match that seen in 2021, we nonetheless expect the new year to be very active from an M&A standpoint. More capital from new buyers continues to pour into the industry, which keeps an upward pressure on valuations. Challenges faced by the buyer community will be competing for a smaller base of sellers, a rise in interest rates and a reduced concern over increases in capital gains tax rates.
Timothy Cunningham, Dan Menzer and Steve Germundson are principals at Optis Partners LLC, a Chicago-based investment banking and financial consulting firm that serves the insurance distribution sector. Mr. Cunningham can be reached at firstname.lastname@example.org
or 312-235-0081; Mr. Menzer can be reached at email@example.com or 630-520-0490; and Mr. Germundson can be reached at firstname.lastname@example.org or 612-718-0598.