Definity Financial Corporation (Definity) subsidiary McDougall Insurance Brokers (McDougall) has bought MacFarlan Rowlands Insurance Brokers (McFarlan Rowlands) and its affiliated entities for aggregate cash and share consideration of $232 million.
The combined operations will see a combined over $700 million in annual premiums, 670 employees, and 57 office locations, Definity said in a press release in which it teased at national expansion.
McFarlan Rowlands is an Ontario-based insurance broker with 200 employees and 18 offices in southwestern Ontario. The group handles more than $200 million in annual premiums, with expertise in claims adjusting and life and group benefits in addition to its property and casualty operations.
"Partnering with McDougall makes strong strategic sense given our common focus on exceptional customer service, broad carrier relationships and profitable growth," said Burke Neale, CEO, McFarlan Rowlands. "We are excited about the opportunity to join Definity and McDougall in building a leading broker platform."
As a result of the deal, aggregate expected operating income from Definity’s broker investments is expected to increase from $40 million to around $60 million before finance costs, taxes and minority interests, Definity said.
"McFarlan Rowlands provides immediate scale and meaningfully advances Definity's broker platform strategy," said Rowan Saunders, president and CEO, Definity. "We now have appropriate scale from which to extend the platform geographically and, with this transaction, we are making strong progress toward creating another billion-dollar business for Definity."
The cash portion of the purchase price was funded via excess capital and debt, with the remaining portion satisfied by share issuances in McDougall to shareholders of McFarlan Rowlands, Definity said.
Definity’s ownership in McDougall will sit at around 75%, accounting for related transactions, it said. The insurer acquired a majority stake in McDougall last year.
"McFarlan Rowlands is a high-performing brokerage led by a seasoned management team with a well-known brand and a long track record of value creation," said Ross McDougall, CEO, McDougall. "The Definity and McDougall broker platform model, including its focus on shared ownership, continues to drive strong interest from the broker community."
The associated sum remains subject to closing and post-close adjustments, with the transaction having closed on May 8, 2023, Definity said.
