Deals for property & casualty and benefits brokers in US and Canada decline 27% through Q3 2023, OPTIS Partners reports-a regression to the mean. The M&A bubble has deflated.
CHICAGO, IL / ACCESSWIRE / November 1, 2023 / There were 534 announced insurance agency mergers and acquisitions during the first three quarters of 2023, down from 729 in 2022, according to OPTIS Partners' M&A database. It was the largest decline through the third-quarter ever reported.
The data covers U.S. and Canadian agencies selling property-and-casualty insurance, agencies selling both P&C and employee benefits, and those selling only employee benefits. Since 2022 the data has included include life/financial services, consulting, and other businesses associated with insurance distribution.
"The slowdown in deal activity is driven by several factors," said Steve Germundson, partner of OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry. "Rising costs of capital, the increase in leverage and a smaller supply of business owners ready to sell are primary reasons."
Former top active buyers cut back and new ones take lead
Perennial deal-count leaders, Acrisure and PCF Insurance, have slowed deal activity dramatically as combined they did 81% fewer transactions than in 2022.
Broadstreet Partners and Hub International led all buyers with 43 and 37 transactions year-to-date, respectively. Other top buyers were Inszone Insurance Services and Leavitt Group at 27 deals apiece, World Insurance Associates at 24, and Arthur J. Gallagher at 25. No other buyer reported more than 25 transactions in 2023.
Of the 10 most-active buyers, four completed fewer deals through the first three quarters of 2023 versus 2022: Acrisure (off by 66%), Hub International (down 31%), Patriot Growth Insurance Services (down 10%), and Keystone Agency Partners (5% lower).
Leaders in year-over-year growth were Broadstreet Partners, up 87%, Leavitt Group (80%), Arthur J. Gallagher (67%), and Risk Strategies Company (up 35)%.
Private equity-backed/hybrid group dominates buyers
The report breaks down buyers into four groups:
- private equity-backed/hybrid brokers
- privately held brokers
- publicly held brokers
- all others
The private equity-backed/hybrid group of buyers did 67% of all transactions so far in 2023 compared to 71% in the same period in 2022, while acquisitions by privately held brokers moved up slightly from 22% to 24%. Gallagher's increased activity nudged the publicly traded brokers share of deals from 5% to 6% of the total.
P&C agencies dominate sellers
Among sellers, P&C-only agencies accounted for 333 of the total 534 transactions (62%), consistent with their percentage of the totals in recent years. Agencies that focus solely on employee benefits and agencies that write both P&C and employee benefits each accounted for 12% of sales.
MGA sellers accounted for 5% of the transactions, with the balance split among TPAs and sellers of life/financial services agencies, consulting, and other businesses associated with insurance distribution totaling 8% of sales. (Figures add up to 99% because of rounding.)
Return to pre-bubble pace expected
"Despite the fact that the number of transactions has fallen dramatically since the end of 2022, there are still a lot of deals being done and a number of buyers likely not strapped with debt are upping their deal flow," said Dan Menzer, partner at OPTIS.
"We continue to see valuations holding, especially for attractive sellers," said Tim Cunningham, managing partner.
"The economic change of rising interest rates and a reduction in the supply of sellers has fundamentally changed the value proposition that the insurance distribution business represents. It has not reduced the demand from a still robust group of buyers. We expect the valuation environment to hold rather steady, though we could see that soften slightly for less attractive firms over the coming quarters."
The full report can be read at https://optisins.com/wp/2023/10/q3-2023-ma-report/.
OPTIS Partners has consistently been ranked in the top six most active agent-broker M&A advisory firms for 2014 - 21 by S&P Global Market Intelligence.
Focused exclusively on the insurance-distribution marketplace, Chicago-based OPTIS Partners (www.optisins.com) offers merger & acquisition representation for buyers and sellers, including due-diligence reviews. It provides appraisals of fair market value; financial performance review, including trend analysis and internal controls; and ownership transition and perpetuation planning.
Contact: Steve Germundson, OPTIS Partners, germundson@optisins.com 612-758-0598
Tim Cunningham, OPTIS Partners, cunningham@optisins.com, 312-235-0081
Dan Menzer, OPTIS Partners, menzer@optisins.com, 630-520-0490
Henry Stimpson, Stimpson Communications, Henry@StimpsonCommunications.com
SOURCE: OPTIS Partners
View source version on accesswire.com:https://www.accesswire.com/798208/insurance-agency-mergers-and-acquisitions-ytd-plunge
