In the first half of 2024, there were 300 announced insurance agency mergers and acquisitions, a 20% decrease from 385 in the same period in 2023, according to OPTIS Partners' M&A database.
This marks the lowest first-half total in four years and is 26% below the previous five-year first-half average. The deal count has been below the long-term trend line for six consecutive quarters.
Steve Germundson (pictured above), a partner at OPTIS Partners, noted that the current rate of deal-making is comparable to that of 2019 and 2020.
Timothy J. Cunningham, managing partner at OPTIS, also observed that while some previously active buyers have become relatively inactive, a few are increasing their activity. Some buyers that did not slow down during the recent economic downturn have accelerated their buying pace.
According to OPTIS’ database, BroadStreet Partners recorded the most transactions in the first half of 2024 with 46, a 77% increase from the same period last year.
Inszone and Hub followed with 27 and 26 deals, respectively. While Hub's deal-making pace is consistent with previous years, Inszone has increased its pace annually since 2021.
The top 13 buyers, including the top 10 and ties, accounted for 193 deals, or 64% of the total. All were private equity-backed firms except Leavitt Group (private) and Arthur J. Gallagher (publicly traded).
There were 62 unique buyers of insurance-distribution-related businesses in the first half of 2024. Of these, 41 completed fewer than five transactions, and 26 did just one. Fourteen firms also announced their first acquisition.
The report categorizes American and Canadian buyers into four groups: private equity-backed/hybrid brokers, privately held brokers, publicly held brokers, and others. Private equity-backed/hybrid brokers dominated with 71% of transactions, while deals between private parties accounted for 20%. Publicly held brokers and others accounted for just 7%.
The report also covers four types of sellers: property and casualty (P&C) insurance agencies, agencies offering both P&C and employee benefits, employee benefits agencies, and other sellers (life/financial services, consulting, and other businesses related to insurance distribution).
P&C sellers accounted for 198 transactions, or 66% of the total. Employee benefits agencies had 34 sales (11%), and there were 33 sales of P&C/benefits agencies (11%). Other sellers accounted for 35 sales (12%).
“We could be only at the beginning of a longer slide, but it seems unlikely,” Germundson said. “A plethora of buyers is still looking to invest capital, and there are still a robust number of independent agencies unable to internally perpetuate their ownership. So we could likely be approaching a ‘normal’ level of deal-making, similar to what we saw around 2017-2019.”
If inflation declines and the Federal Reserve cuts interest rates by the end of the year, buyers may become more active, Germundson said, noting that the market is still supply-side driven.
“It’s quite interesting that there are several brokers openly discussing their intentions on going public in 2024 or 2025, something that hasn’t been a factor, other than Baldwin Risk, in many years. The market is always evolving,” Cunningham said.
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