Deals for property & casualty and benefits brokers in US and Canada dip 18% YTD, OPTIS Partners reports

CHICAGO, IL / ACCESSWIRE / April 23, 2024 / There were 155 announced insurance agency mergers and acquisitions in the first quarter of 2024, down 18% from 188 in the same period in 2023, according to OPTIS Partners' M&A database.

This marks the slowest quarter since the second quarter of 2020, in the depths of the pandemic. Five consecutive quarters have fallen below the long-term trend line from a deal-count perspective.

"On a trailing 12-month basis, we're back to levels that we last witnessed at the end of 2020," said Steve Germundson, a partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.

A few big buyers pulling back had an outsized impact.

"Although a few very active buyers have stood down over the past year to integrate operations, bolster balance sheets, or reconsider their strategy, a healthy number of buyers are still pursuing deals," said OPTIS managing partner Timothy J. Cunningham.

BroadStreet and Hub lead buyers

BroadStreet Partners increased its pace and recorded the most transactions in Q1 2024 with 29 deals, followed by Hub International at 12, Inszone Insurance Services at 10, and Keystone Agency Partners at eight. Other top buyers were Arthur J. Gallagher and OneDigital with seven deals each, and ALKEME and Leavitt Group with five deals each. Each of the eight most- active buyers in Q1 either matched or increased their deal count over Q1 2023.

Leaders in Q1 2023 less active YTD included World Insurance (eight fewer), Patriot Growth (seven fewer), and several firms with five fewer (Choice Financial Group, The Hilb Group, and NFP).

Past perennial leaders Acrisure and PCF accounted for 47% of the overall decline in deal count over the past 12 months. Notably, it took an increase from 11 firms to make up for this deficit.

There were 116 distinct buyers in Q1 2024 compared to 148 in Q1 2023.

Private equity buyers dominate

The private equity-backed/hybrid group of buyers continued to drive the deal activity in Q1 '24 with 71% of all transactions for the quarter. This group is comprised of 26 firms, only one of which completed its first transaction in Q1 of 2024. Transactions between private parties accounted for 21% of the deals done by 24 distinct firms, 10 of which did their first transaction in Q1 ‘24.

P&C Agencies dominate sellers

P&C sellers accounted for 106 transactions (62% of the total). Benefits agencies sales totaled 12 (13%), and there were 19 sales of P&C/benefits agencies (11%). All other sellers accounted for 18 sales (15%).

Demand stays strong

The increased number of active buyers is providing support to both the number of deals done and the values paid.

"The industry had 26 private equity-backed buyers, 24 privately owned buyers, and three publicly traded brokers doing deals in Q1 '24," Germundson said. "There is still a lot of capital looking to deploy in this space. What has changed to some degree is the discipline of some of the active buyers who don't appear to be chasing deals as in the past."

Cunningham added: "This strength on the demand side and the perceived depletion of quality firms on the supply side is propping up values for the better firms despite economic fundamentals that have changed materially over the past two years. We don't expect this to change any time soon."

Report tracks activity by buyer and seller types

OPTIS Partners tracks buyers by four groups: private equity-backed/hybrid brokers, privately held brokers, publicly held brokers, and all others.

Sellers are placed in four categories: property/casualty agencies, employee benefits agencies, combination P&C/benefits agencies and all others. The latter includes third-party administrators and related managing general agent operations, and agencies solely focused on life insurance, investment or financial management, consulting and other businesses connected to insurance distribution. Quarterly reports cover buyers and sellers in the United States and Canada.

The full report can be read at https://optisins.com/wp/2024/04/q1-2024-ma-report/.

About OPTIS Partners

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