Reagan Consulting co-sponsored the recent Agency Ownership Summit in Atlanta
According to Reagan Consulting, current market conditions for agency mergers and acquisitions continues to favor those who are selling due to the growing number of buyers which continues to keep demand high.
“Demand, in terms of the number of well-capitalized buyers, has never been higher, and new acquirers continue to enter the market at a remarkable pace. Competition for deals remains white-hot,” noted Tom Doran, partner at Reagan Consulting.
Mr. Doran gave his remarks during the latest Agency Ownership Summit in Atlanta, which was co-sponsored by both Reagan Consulting and the Council of Insurance Agents & Brokers. Mr. Doran noted the fact that almost 1,000 agency deals have occurred across the country in just the past two years alone.
As confirmed in our last look at Agency Mergers and Acquisitions courtesy of the quarterly report published by OPTIS Partners, Mr. Doran said that the largest group of insurance agency buyers continue to be private equity firms, followed by privately held brokerages. “With a finite number of quality sellers and a seemingly infinite number of buyers, valuations remain at historically high levels,” he explained during his speech.
Mr. Doran cited the fact that public broker valuations are a reason fueling elevated private broker valuations. For example, in the first quarter of 2017, he stated that publicly traded brokers’ valuations were 12.7 times EBITDA (earnings before interest, taxes, depreciation and amortization), above the historical multiple of 9 to 11 times EBITDA.
Why agency valuations may be peaking
Mr. Doran also cautioned that agency valuations may, however, have reached their peak. “Valuations appear to have settled in at a high-water mark. We are no longer seeing the steady increases in agency valuations that have accompanied this acquisition bull market since it began in 2010,” he explained.
That said, Reagan Consulting does not expect to see valuations decrease significantly until some of the pressure is relieved on the demand side. “Until buyer demand decreases — which might occur with an increase in interest rates, reduced debt or capital availability, or a decrease in public broker valuations – we are unlikely to see agency valuations decrease materially,” he concluded.
More about the Agency Owner Summit
The Agency Owner Summit bills itself as the insurance industry’s “Premier Mergers & Acquisitions, Perpetuation and Value Creation” event. This year’s meeting (which Agency Checklists did not attend) was held at The St. Regis in Atlanta from May 7-9, 2017 and featured over 150 of the industry’s top leaders including an Industry Leading Buyer Panel featuring the CEOs of Acrisure and Brown & Brown, along with the Chairmans of Arthur J. Gallagher, AssuredPartners, Hub International, Marsh & McLennan Agency and USI.
To learn more about the event, continue on to the website here.