OPTIS Partners does a report every year on the number of mergers and acquisitions in the industry. Last year deals in the United States and Canada set records. No. Wait. Shattered records would be a better way to put what happened.
In 2017 there were 604 deals. OPTIS spokesman Timothy Cunningham said that’s up 31% from the 461 in 2016. “This whopping increase exceeded expectations. We expect the beat to go on in 2018,” he said.
The OPTIS report covers agencies that sell property and casualty insurance, agencies that sell employee benefits and agencies that primarily sell both. Last year private equity and hybrid buyers accounted for 382 of the 604 transactions. That’s 63% of the total and compares to that same group gobbling up 56% of the transactions 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,” Cunningham said.
These are the top-five buyers:
• Acrisure — 92 acquisitions
• Hub International — 49
• Alera Group — 38
• Broadstreet Partners — 32
• Gallagher — 30
All but the publicly owned Gallagher are in the PE/hybrid category.
• Privately owned brokerages had 128 transactions and 105 unique buyers.
• That’s up from 114 from 87 different buyers in 2016.
• Like the year, this category set records for the number of deals and the number of unique buyers.
• Property and casualty agencies — by seller type — dominated and accounted for 301 of the 2017 transactions or 49.8% of the total.
• Employee benefit brokers made 174 transactions — or 28.8% of the total.
• That’s a 90% jump from 2016.
Cunningham said, “The explosion in employee benefits agency sales was fueled by Alera, Acrisure, and several other active acquirers.”
Two other categories are agencies selling both P&C and employee benefits. There were 86 such deals last year and in the “other” category — managing general agents, third-party administrators, etc. — there were 43 sales.
Agencies selling both property/casualty and employee benefits coverages were sold in 86 deals last year.
OPTIS Partners’ partner Daniel P. Menzer had some important observations about last year.
• Inventory is still high and many sellers are interested in moving forward
• Third parties have more money to purchase an agency than internal perpetuation
• Few agencies owners will leave that money on the table
• Easy access to capital makes it easy for buyers to buy
• Investors and lenders are willing to fund the PE/Hybrid buyers
• Those buying ought to pay attention to cash flow and make sure they don’t overpay
• Sellers ought to take advantage of strong pricing before things change
One last comment from Cunningham. He said the actual number of sales is probably greater than OPTIS reported. Many buyers don’t report purchases and some small transactions are ignored. But he said the large purchases which are tracked by a consistent pool of active buyers is a “reasonably accurate indication of deal activity in the sector.”
Source link: Insurance Journal