National M&A Activity Booming in First Half of 2022

Deals for property & casualty and benefits brokers in US and Canada were up 16% in first half, OPTIS Partners reports

Bucking the downward trend of the First Quarter, mergers and acquisitions rose 16% during the first half of 2022 as compared to the same period in 2021.

In total, there were 427 announced agency acquisitions nationally during the first half of 2022 (1H-2022). In comparison, the 1H-2021 saw a total of 369 acquisitions. OPTIS Partners notes that following the typical first-quarter lull, the second quarter of 2022 shot up 20% in volume to become the fourth-most-active quarter of all time.

“One of the drivers is the expanded appetite of the most active buyers to look at businesses adjacent to the agency/brokerage business,” said Steve Germundson, a partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry. “Some 53 of the 427 announced deals came out of life/financial services, actuarial and human resources consulting, technology, and other business related to insurance distribution.”

According to the firm’s quarterly report, which tracks M&A activity nationally, the pace of activity during the first six months of 2022 was 13% above the previous five-year average as measured during the same time period. Interestingly, those five years are often regarded as the most active period for the M&A market ever.

“It was not too surprising that the number of deals done in the traditional agency/brokerage segment was almost flat at a 1.5% increase,” said OPTIS managing partner Timothy J. Cunningham.

“There simply aren’t the same number of sellers there as in the past,” he continued. “But buyers still have a lot of capital to deploy, and they are finding opportunities to fill other needs in their businesses with firms in this expanded space.”

OPTIS Partners’ Report Now Covers 4 Types of Sellers & Buyers

As noted in the first quarterly report of the year, OPTIS Partners has expanded its reporting in 2022 to now include mergers & acquisitions of four types of buyers and sellers associated with the insurance distribution system. These four groups include:

private equity-backed/hybrid brokers,privately held brokers,publicly held brokers, andall others

The addition of the fourth group allows for the inclusion of business associated with the insurance distribution system such as the life/financial services industry and consulting businesses.

Majority of Sellers Continue to be P&C Agencies

As evidenced in our own tally of the mergers and acquisitions occurring in our region during the 1H-2022, the vast majority of sellers in the insurance industry continue to be traditional P&C insurance agencies. According to OPTIS Partners, a total of 83% of the businesses sold were in traditional retail insurance distribution. Of that amount, 59% of the total, or 253 of the 427 announced transactions so far this year involved P&C sellers. In a distant second, benefits agencies sales consisted of the second most active group with a total of 53 announced transactions representing 12% of all M&A activity in 2022. Sales of P&C/benefits agencies represented the third most active group with 48 sales totalling 11% of all businesses sold in 1H-2022. The final category, representing all other sellers within the insurance distribution system, accounted for the remaining 17% of sales or 73 announced deals.

“Tallies for deals so far in 2022 and conversations with buyers indicate that the second half of the year should be robust. The final tally may not be as high as 2021, but it could prove to be close,” Germundson said.

Leading National Buyers Include PCF, Acrisure and Hub

The following are the most salient takeaways from the report with respect to buyers:

The ten most-active buyers accounted for 55% of all the deals announced so far in 2022, while 72 buyers accounted for the remaining 45% (43 buyers made only one acquisition).Among buyers, PCF took the top spot for the first time with 48 deals done so far in 2022. This is a 70% increase over the same period in 2021. Acrisure with 43 and Hub with 35 followed, both of them marking 40% increases over the prior year. Others that saw significant jumps in their deal count were Inszone at 20 (up nearly seven-fold), Patriot Growth at 16 and Keystone Agency Partners at 10 (both tripled in count). Some active buyers dialed back activity, including AssuredPartners at seven (down 68%), World Insurance at nine (down 36%), Hilb at seven (down 22%), and BroadStreet at 16 (down 16%). Other top buyers included High Street Partners (20) and Relation (16 deals).

The private equity-backed/hybrid group of buyers maintained their dominance in the buying spree with 76% of all transactions for the first half of the year, while transactions between private parties accounted for 15%.

Top 10 Acquirers of 2021

The following is OPTIS Partners listing of the Top 10

BUYER BY TYPE20182019202020211H-2022PCF Insurance44369948Acrisure1019810812243Hub International5952656135High Street Partners1397120BroadStreet Partners3434584516Patriot Growth Insurance Services25213116Relation Insurance6113316Integrity Marketing Group461611Keystone Agency71410All Other438416469567192Total Reported Transactions6436507951061427

Significant Broker Transactions during 1H-2021

In this quarter’s report, OPTIS Partner also include a new section entitled Significant Broker Transactions, listing three notable deals during 1H-2022:

California’s Westwood Insurance Agency sold to Baldwin Risk Partners in March 2022 for $82 million.Distinguished Programs of New York sold to Aquiline Partners in April 2022 for $122 million.NSM Insurance Group sold to the Carlyle Group for $250 million in May 2022.

How to access the full report as well as the Q1-2021 Report

The OPTIS Partners report is based on its own proprietary database tracking which are the most active acquirers and other announced transactions. As such, while it is a reasonably accurate indication of deal activity in the sector, it is highly probable that the actual number of agency acquisitions was far greater than the total number reported. One simple reason for this result is that many buyers and sellers do not report transactions at all, while other acquirers omit reporting small transactions. Access the report by click the image below: