Marsh's acquisition of McGriff Insurance Services, valued at an impressive $7.75 billion, turned heads in the industry when it was announced in late September.
The move doesn’t just signify a growth opportunity for the brokerage giant, but also speaks volumes about emerging trends in insurance mergers and acquisitions (M&A), according to one industry analyst. As one of the largest deals this year, the purchase illustrates a strategic shift for Marsh: a push into the mid-market insurance segment.
David Crofts (pictured below), director of mergers and acquisitions at West Monroe, a business and technology consultancy, said the transformative acquisition mirrors similar moves by competitors like Aon, which unveiled a deal to purchase NFP for $13.4 billion in December 2023.
“This mid-market is competitive, but there is still a lot of potential for consolidation,” Crofts told Insurance Business. “However, opportunities for consolidation at the scale of the McGriff or NFP deals are rare. That’s why this deal is particularly appealing and likely why we’re seeing it command a high price point.”
One of the potential driving forces behind the acquisition is Marsh's ambition to expand its reach beyond its usual base of large corporate clients, such as Fortune 500 companies.
By acquiring McGriff, a leading provider of insurance broking and risk management services in the US with around $1.3 billion of revenue, Marsh appears keen to capture a share of the mid-market sector, a segment that is not only competitive but remains relatively untapped at scale.
For Crofts, this strategic shift is rooted in a changing economic landscape, where consolidation among insurance firms is becoming essential for growth. Although there’s been a slowdown in insurance M&A in recent years, deal activity is showing signs of picking up, and companies that once dominated the top end of the market are now keen to stake their claim in what they see as the next growth area.
What makes this deal particularly noteworthy, Crofts noted, is the digital and data synergy potential it offers Marsh.
“There’s substantial synergy potential in digital and data capabilities,” said Crofts, who has more than 20 years’ experience as a consultant creating scale in industries including insurance. “It will be interesting to see how Marsh leverages this to streamline operations. By bringing the expertise and services they offer in the larger market down to the mid-market and implementing a digital approach, they could operate more efficiently.
“If they succeed in optimizing their operating model this way, they could tap into the mid-market without eroding profit margins on commission-based business.”
In the mid-market space, Marsh can bring expertise and services traditionally available to larger clients, aiming to streamline operations using digital tools. However, the mid-market space, while lucrative, brings unique challenges.
Marsh is entering a segment where clients are increasingly seeking flexibility and autonomy, Crofts said. Unlike large corporations that may still prefer the traditional “belly-to-belly” relationships, as Crofts put it, mid-market clients often lean toward digital solutions that allow for self-service and ease of access.
“Younger decision-makers want more of a self-service administrative experience,” he said, noting this evolving client expectation is a key factor behind the acquisition and is likely to continue shaping the M&A landscape.
Could more deals of similar size follow the Marsh-McGriff merger? There’s certainly potential, according to Crofts. “A few players are in positions similar to Marsh and Aon, and they would likely welcome an acquisition that opens up new market space for them,” he said.
Another significant trend that could spur further deals is the increased focus within both the carrier and large broker spaces on creating operational efficiency. This shift, Crofts observed, largely stems from a need for cost control and containment, especially with the pressures from fluctuating interest rates, business erosion, and market volatility.
“We’re seeing larger brokers put some of these assets back on the market. Similarly, on the carrier side, earlier investments in insurtech are now being carved out and sold off,” Crofts said. “So, while there’s certainly a portion of the market looking for transformative acquisitions, another portion is shifting focus back to core capabilities and core business areas.”
As a result, the insurance M&A market will likely see two trends develop: some firms pushing for significant acquisitions while others trim down – and one sector standing to benefit.
“Interestingly, it hasn’t been strategic buyers that are interested in these carve-out assets as much as private equity players, who are seeing potential opportunities,” Crofts said.
Do you have any thoughts about the Marsh-McGriff acquisition deal and other insurance M&A trends? Please share your comments below.
