2019 M&A activity surpassed 2018 but may be showing signs of a slow-down
In another year that surpassed expectations, insurance agency mergers and acquisitions activity had another record year in 2019. According to the latest data from OPTIS Partners’ annual report, there were 649 deals in the United States and Canada last year, six more than 2018 which now ranks as the second most active year on record with 643 M&A deals. Of that number, 320 transactions were completed during the second half of 2019 and 149 in the Fourth Quarter.
“Agency valuations continue to climb based in part on the continued expansion of interest from the PE/hybrid group,” said Timothy J. Cunningham, managing director of OPTIS, an investment banking and financial consulting firm specializing in the insurance industry. “There’s nothing on the horizon to indicate any change should be expected in the current state of agency M&A.”
Private Equity/Hybrid Buyers continue to lead in acquisitions
Private equity/hybrid buyers continued to outstrip all other types of buyers in 2019, accounting for 69% of the total amount of transactions completed in 2019 or 448 transactions. This is just a couple of percentage points more than in 2018 when this group accounted for 67% of all transactions with 434 transactions.
OPTIS Partners noted that the number of unique buyers, however, dropped from 153 in 2016 to 131 in 2019, while the number of PE/hybrid buyers simultaneous has increased from 27 to 35. At the same time, the top 10 buyers in 2019 accounted for 58% of transactions, a slight decrease from 61% in 2018.
Acrisure continued to lead in acquisitions with almost double the amount of the second most active buyer in 2019, Hub International. The following graph from OPTIS Partners lists the top ten buyers in 2019. While the top 10 buyers continued to be active, their completed transactions accounted for 58% of all transactions in 2019, down slightly from 61% in 2018.
Two familiar names in the Massachusetts insurance industry are among the most active buyers since 2015
One of the most interesting asides from the current 2019 report can be found in Appendices of the current OPTIS Partner’s Report. While Private Equity/Hybrid Buyers were the most active buyers, privately-owned firms also saw an uptick in completed transactions, announcing 118 in 2019, four more than the 114 in 2018.
What might be most interesting for Agency Checklists readers to note, however, is the two New England agencies which made this list. Cross Insurance was named the top Privately Owned Buyer since 2015, while Massachusetts’ own Kaplansky Insurance was ranked as the fourth most active buyer. The following is a table based on the information provided in the OPTIS Partner Report:
Two Massachusetts Banks also make the list of Top Active Buyers – Banks
Two other members of the Massachusetts insurance industry also made the list of the 2019 most active buyers. In Appendix 4 which highlights the most active insurance agency buyers that are banks, Eastern Bank, whose insurance agency is the Natick-based Eastern Insurance, was the top bank buyer over the past lustrum with a total of 10 agency acquisitions since 2015. Also making the list was Salem Five Bankcorp with two purchases and sales during the same time period.
Boston Omaha is also included in the list of most active buyers
Finally, Boston Omaha, a holding company based in both Omaha Nebraska and Boston, Massachusetts also was included in the 2019 round-up as one of the most Active Buyers – All Others. If our readers remember, Boston Omaha is “…a public holding company with businesses engaged in several sectors, including advertising, insurance, and real estate.” Among the companies included in its portfolio is General Indemnity and the United Casualty and Surety Insurance Company.
P&C insurance agencies are top sellers again
As for which type of insurance entity was sold the most in 2019, Property & Casualty insurance agencies, propelled by higher valuations and the continued “greying” of the insurance industry continued to lead all agency sales in 2019. P&C agencies accounted for approximately 51% of all transactions or 329 deals followed by employee benefits firms which represented 25% of the total of all transactions completed in 2019, or 162 announced deals.
“Despite the slight reduction in the number of deals completed during the latter half of 2019, we believe the environment remains very strong for agencies looking to sell,” said Daniel P. Menzer, partner.
“With the multiples being offered, few sellers should have any difficulty achieving the financial returns they are looking for. And with such a variety of buyers in the marketplace, sellers need to fully explore their options in order to find the right partner with a culture and business model that will best fit their people, clients, and organizational structure.”
How to access the full report
For those interested in accessing the full OPTIS Partners Report, it can be accessed here: 2019 Agent & Broker Mergers & Acquisition Update.
For those who are looking for more information on the number of agency acquisitions in Massachusetts in 2019, please refer to Agency Checklists’ January 24, 2020 article entitled” “2019 Insurance Agency Mergers & Acquisitions In Massachusetts.”
More about the OPTIS Partners Report
The OPTIS Partners report is based on its own database which tracks the most active acquirers and other announced transactions. As such, while it is a reasonably accurate indication of deal activity in the sector, the actual number of agency acquisitions was far greater than the number reported, as many buyers and sellers do not report transactions, and some acquirers do not report small transactions.
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. OPTIS Partners was ranked in the top five most active agent-broker M&A advisory firms for 2014–2019 by S&P Global Market Intelligence.