Broker M&As decline from previous high

The number of mergers and acquisitions involving insurance agents and brokers fell to 555 in the first nine months of 2022, down 14% compared with the record level of deals in the same period last year, according to a report issued Monday.

The report by Chicago-based M&A advisory company Optis Partners LLC said the fall reflected a return to “normal” after an acceleration in brokerage M&As last year when many owners sold their agencies fearing a potential increase in capital gains tax.

“This return to a ‘normal’ number of deals is to be expected considering the surge in deals last year along with the fact that a lot of the agency owners contemplating whether or not to sell pulled the trigger on it in the last few years. The inventory has shrunk,” Dan Menzer, partner at Optis, said in a statement accompanying the report.

Rising interest rates may limit some buyers in the future, but so far they are not affecting the prices being paid to acquire companies in what remains a competitive environment for deals.

“The increase in the cost of capital should work to reduce values, yet the ever-expanding number of buyers appears to be propping them up,” Tim Cunningham, managing partner at Optis, said in the statement.

Optis tracks M&A activity involving U.S. and Canadian property/casualty and employee benefits brokers, and third-party administrators. In 2022 it began tracking life insurance and financial services consultants, too, which would take the total number of deals so far this year to 627.

Including all types of companies, Acrisure LLC was the most active buyer with 80 transactions in the first three quarters. PCF Insurance Services was the second most active with 56 deals; Hub International Ltd. was third with 50 deals; High Street Insurance Partners Inc. was fourth with 30; and Inszone Insurance Services Inc. was fifth with 23.

Significant deals announced in the third quarter included: IMA Financial Group Inc.’s purchase of York International Agency LLC; Truist Insurance Holdings Inc.’s acquisition of BenefitMall Inc. and Arthur J. Gallagher & Co.’s purchase of M&T Insurance Agency Inc., the report said.