Agency M&A Deals in U.S. and Canada Soar 31 Percent; Private Equity/Hybrid Buyers Account for 63 percent of Deals; Property-Casualty Agencies Most Often Sold; Sales of Employee Benefits Agencies Nearly Double
CHICAGO, IL / ACCESSWIRE / January 18, 2018 / Mergers and acquisitions of insurance agencies last year broke all records in 2017, according to OPTIS Partners' annual report. The OPTIS database recorded 604 deals in the United States and Canada in 2016, a 31 percent jump from 461 in 2016.
''This whopping increase exceeded expectations,'' said Timothy J. Cunningham, managing director of OPTIS, an investment banking and financial consulting firm specializing in the insurance industry. ''We expect the beat to go on in 2018.''
The report covers agencies selling primarily property-and-casualty insurance, agencies selling both P&C and employee benefits, and employee benefits agencies.
Private equity/hybrid buyers accounted for 382 transactions, 63 percent of the total, compared with 56 percent in 2016.
''The concentration of PE /hybrid buyers has grown steadily since we began tracking deals in 2008 when only four of the top 10 buyers had private equity backing,'' he said.
The 2017 report lists PE/hybrid as a new buyer category. It includes all private-equity-backed buyers plus certain privately owned buyers with material internal or external financial support for acquisitions.
The top five buyers were Acrisure (92 acquisitions), Hub International (49), Alera Group (38), Broadstreet Partners (32), and Gallagher (30). All were in in the PE/hybrid category except publicly owned Gallagher.
Privately owned brokerages completed 128 transactions from 105 unique buyers in 2017, up from 114 acquisitions from 87 separate buyers in 2016. This was a record number both of deals and unique buyers.
By seller type, property-and-casualty-focused agencies dominated the list. They accounted for 301 of the 2017 transactions, 49.8 percent of the total.
Employee benefits brokers accounted for 174 transactions, 28.8% of the total, nearly a 90 percent increase from 2016.
''The explosion in employee benefits agency sales was fueled by Alera, Acrisure, and several other active acquirers,'' Cunningham said.
Agencies selling both property/casualty and employee benefits coverages were sold in 86 deals last year.
There were 43 sales in the ''other'' category, which includes managing general agents, third-party administrators and other types of sellers.
The statistics pointed to these key lessons, according to Daniel P. Menzer, partner:
- The inventory of interested sellers remains high.
- It's hard to perpetuate agencies internally. Third parties are willing to pay much more than internal buyers. Few agency owners will leave that much money on the table.
- A strong economy, a stable insurance market, and easy access to relatively inexpensive capital for buyers all spurred activity.
- There are plenty of investors and lenders willing to fund PE/hybrid buyers.
- If you're a buyer, pay attention to cash flow and be careful not to overpay.
- If you're a seller, identify the best cultural and operational fit. Take advantage of strong pricing before things change.
The actual number of sales was greater than the number reported, as many buyers and sellers do not report transactions, and some acquirers do not report small transactions, Cunningham said.
''The OPTIS database, however, tracks a consistent pool of the most active acquirers, including other announced deals, and is, therefore, a reasonably accurate indication of deal activity in the sector,'' he added.
The full report, 2017 Agent & Broker Mergers & Acquisition Update, can be read online at http://optisins.com/wp/2018/01/december-2017-ma-report.
OPTIS (www.optisins.com) was ranked as the fourth most active agent-broker M&A advisory firm in 2017 and fifth most active in 2014, 2015 and 2016 by SNL Financial.
Focused exclusively on the insurance distribution marketplace, Chicago-based OPTIS 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.
Total agency mergers and acquisitions by year, US and Canada, 2008-2017. Source: OPTIS Partners.
#insurance #mergers
Insurance agency mergers and acquisitions, US and Canada, by buyer type, 2008-2017. Source: OPTIS Partners
#insurance #mergers
Insurance agency mergers and acquisitions, US and Canada, by seller type, 2008-2017. Source: OPTIS Partners
#insurance #mergers
Contact:
Tim Cunningham
OPTIS Partners
[email protected]
312-235-0081
Dan Menzer
OPTIS Partners
[email protected]
630-520-0490
Henry Stimpson
Stimpson Communications
508-647-0705
[email protected]
SOURCE: OPTIS Partners