Insurance Agency Mergers and Acquisitions Decline in First Half
Deals for property & casualty and benefits brokers in United States and Canada dip 24% in first half, OPTIS Partners reports
CHICAGO, IL / ACCESSWIRE / July 18, 2023 / There were 359 announced insurance agency mergers and acquisitions in the first half of 2023, down 24% from 475 in the same period in 2022, according to OPTIS Partners' M&A database.
It was the lowest first-half total since 2020 but nevertheless equal to the previous five-year average.
"The drop-off in deal count continues as we move through 2023, which isn't surprising anyone if for no other reason than the cost of capital has increased so much," said Steve Germundson, a partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.
OPTIS managing partner Timothy J. Cunningham added, "We're seeing the effects of relative inactivity of some previously very active buyers, yet others are successfully completing more deals."
Hub and Broadstreet Lead Buyers
Among buyers, Hub International and BroadStreet Partners recorded the most transactions in H1 2023 with 29 and 26 deals, respectively. Inszone, World, and Patriot Growth followed with 22, 17, and 16 deals, respectively.
Among the most historically active buyers for which deal volume declined materially compared to the same period in 2022 are PCF (off 98%), Acisure (down 74%), and Highstreet Partners (down 57%). These three firms account for over 75% of the net decrease in the number of completed transactions.
Active firms that picked up the deal pace in H1 2023 versus H1 2022 are World Insurance Associates (up 112%), Risk Strategies (86% higher), and Broadstreet Partners (up 62%).
The report breaks down American and Canadian buyers into four groups: private equity-backed/hybrid brokers, privately held brokers, publicly held brokers, and all others. The private equity-backed/hybrid group of buyers maintained their dominance in the buying spree with 69% of all transactions for the quarter, while transactions between private parties accounted for 22%. Publicly held brokers and all others accounted for just 9% of deals
P&C Agencies Dominate Sellers
The report covers four types of sellers: agencies property-and-casualty insurance agencies, agencies offering both P&C and employee benefits, employee benefits agencies, and all other sellers (life/financial services, consulting and other businesses associated with insurance distribution).
P&C sellers accounted for 214 transactions (60% of the total). Benefits agencies sales totaled 45 (12%), and there were 47 sales of P&C/benefits agencies (13%). All other sellers accounted for 53 sales (15%).
The decline in deal count is somewhat broad-based, but clearly the absence of previously active buyers skews the optics of this decline.
"The nine-quarter deal bubble that began in Q4 2020 is clearly in the rear-view mirror," Germundson said. "But we're continuing to see interest in the buy-side from a large number of firms, and there is evidence that valuations for better firms remain strong. If interest rates continue to rise as expected, there may be more buyers forced to the sidelines, creating opportunities for those with stronger balance sheets."
"An active buyer community is just one part of the equation. The other part is that there is still a large number of aging agency owners who will be providing plenty of supply for the continuing demand," said Cunningham.
The full report can be read at https://optisins.com/wp/2023/07/h1-2023-ma-report/
Focused exclusively on the insurance-distribution marketplace, Chicago-based OPTIS Partners (www.optisins.com) 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.
Contact: Steve Germundson, OPTIS Partners, germundson@optisins.com 612-758-0598
Tim Cunningham, OPTIS Partners, cunningham@optisins.com, 312-235-0081
Dan Menzer, OPTIS Partners, menzer@optisins.com, 630-520-0490
Henry Stimpson, Stimpson Communications, Henry@StimpsonCommunications.com
SOURCE: OPTIS Partners
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