What’s happening in agency M&A in the US and Canada?
What’s happening in agency M&A in the US and Canada? | Insurance Business America
Mergers & Acquisitions
What’s happening in agency M&A in the US and Canada?
OPTIS Partners’ database provides answers
Mergers & Acquisitions
By
Terry Gangcuangco
In the first quarter, the insurance industry in Canada and the US witnessed an 18% decrease in agency mergers and acquisitions (M&A), with only 155 transactions recorded compared to the 188 deals in the same period last year.
Q1 2024 represented the slowest quarter in North America since the second quarter of 2020, as highlighted by OPTIS Partners’ M&A database, which showed a consistent decline over five consecutive quarters relative to the long-term average.
Steve Germundson, a partner at investment bank and financial consultancy OPTIS Partners, said: “On a trailing 12-month basis, we’re back to levels that we last witnessed at the end of 2020.”
According to OPTIS Partners, the drop in transactions can be partially attributed to prominent buyers scaling back their activities. Despite this, Timothy J. Cunningham, OPTIS managing partner, believes the market remains active.
“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,” he said.
In terms of transaction leaders, BroadStreet Partners led the pack with 29 transactions in the first quarter, followed by Hub International with 12, Inszone Insurance Services with 10, and Keystone Agency Partners with eight. Other significant players included Arthur J. Gallagher and OneDigital, each securing seven deals, and ALKEME and Leavitt Group each bagging five.
In contrast, firms such as World Insurance, Patriot Growth, Choice Financial Group, The Hilb Group, and NFP saw reductions in their activity year-to-date. Notably, Acrisure and PCF were responsible for 47% of the overall decrease in transaction volume over the last year.
The first quarter of 2024 saw 116 distinct buyers compared to 148 in the corresponding quarter of the previous year, with private equity-backed and hybrid buyers accounting for 71% of all transactions. These buyers included 26 firms.
Meanwhile, property & casualty agencies dominated the seller landscape, accounting for 106 of the 171 total transactions. Employee benefits agencies contributed 12 deals, and combined P&C/benefits agencies had 19, while all other types of sellers were involved in 18 transactions.
Germundson observed a shift in market discipline, saying: “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.
“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.”
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