Deals for property & casualty and benefits brokers in US and Canada dip 12% in first quarter, OPTIS Partners reports
The latest report from OPTIS Partners notes that while the “pace and scope continued unabated through most of February”, it is important to remember that this was mainly due to the fact that the realities of the global pandemic had yet to be realized. While interest in acquisitions for strategic and operational reasons remains strong in the First Quarter of 2020 (Q1-2020), it is virtually impossible to tell how the rest of the year will continue until some “degree of stabilization” has been returned to the marketplace.
Highlights from Q1-2020
While there was a slight first-quarter impact from the global pandemic during the First Quarter of the year, it goes without saying that this impact will be nothing in comparison to the remaining three quarters of the year. With that said, the following are some insights and highlights offered by OPTIS Partners:
- One of the most notable P&C Broker transactions so far this year is the announced sale of Willis Tower Watson PLC to Aon Plc.
- There were 137 transactions in Q1-2020, down from 155 in 2019.
- This transaction amount is the lowest quarterly total since the Q4-2016.
- Massachusetts had approximately nine announced transactions during this same time period.
- Overall, there have been approximately 631 transactions in the past 12 months, representing the lowest level since Q3-2018.
- Expectations are that there will be a severe slowdown of M&A activity in Q2-2020, and possibly in Q3-2020 as a result of the pandemic and its repercussions with respect to future projects and valuation implications.
In commenting on the report, OPTIS Partners said the decline may just reflect a slight aberration in the timing of deal closings, or it may reflect the beginning of the impact of the COVID-19 pandemic.
Private Equity/Hybrid Buyers continue to lead in acquisitions
SImilar to past reports, OPTIS Partners breaks down buyers into the following four groups:
- Private equity-backed/hybrid brokers,
- Privately held brokers,
- Publicly held brokers, and
- All others.
Acrisure led all buyers with 18 transactions in the first quarter, one more than in 2019. Other top buyers were Broadstreet Partners with 17 deals, Hub International (12 deals), Assured Partners (8), and The Hilb Group (6). The private equity-backed/hybrid group of buyers maintained their dominance in the buying spree with over 60% of all transactions for the quarter. But that’s their lowest share since early 2017.
P&C sellers accounted for 64 transactions (47%), with benefits agencies and P&C/benefits agencies both at about 20% of the total.
“Until there is some degree of stabilization from the pandemic, M&A activity will be significantly impacted as so much of it is based on face-to-face interactions between buyers and sellers,” said Steve Germundson, a partner with the firm. Additionally, there are the unknown financial implications of the shelter-in-place orders.
However, assuming the underlying interest in acquisitions remains in place, in particular by private equity-backed buyers and their backers, buyers will likely come back into the marketplace once there is some clarity about the pandemic, he said.
How to access the full 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.
For those interested in accessing the full OPTIS Partners Report, it can be accessed here: 2020 Agent & Broker Mergers & Acquisition Update.
For those who are looking for more information on the Massachusetts marketplace during Q1-2020, please refer to “Insurance Agency Mergers & Acquisitions In Massachusetts, Q1-2020.”