A recap of the latest quarterly report from OPTIS Partners
The mergers and acquisitions market for agency acquisitions has seen a resurgence returning to pre-pandemic levels in the third quarter of 2020, says OPTIS Partners in its latest quarterly report. According to the firm, the total deal count for the first nine months of 2020 was 466, only 33 acquisitions or a mere 7% difference as compared to the same period last year.
“The small decline is entirely the result of the second quarter 2020 COVID slowdown,” said Steve Germundson, partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry. “Sans pandemic, 2020 would have been on track as a record-setting year. It’s still possible that it will set an annual record.”
While OPTIS Partners notes that the slowdown in deal activity in Q2-2020 was noticeable, the ability of the market to bounce back in Q3-2020 to almost the same level as last year’s numbers is all the more impressive. Based on this latest quarterly data, there is optimism that Q4-2020 also will also see an acceleration of deals looking to close before the end of the year.
As always, the data covered in these quarterly reports include “…U.S. and Canadian agencies selling primarily property-and-casualty insurance, agencies selling both P&C and employee benefits, and those selling only employee benefits.”
Virtually the same number of transactions in Q3-2020 as for Q3-2019
Among one of the most noteworthy statistics for this quarter’s report was the fact that there were 170 reported transactions in Q3-2020, which OPTIS Partners notes is almost virtually the same as the 171 recorded for the same period in 2019.
“Nearly every active buyer from the past few years continues to drive their M&A strategy aggressively, and there are newly emerging buyers now showing up for the first time on the most-active buyer lists,” Germundson said.
The report breaks down buyers into four groups: private equity-backed/hybrid brokers, privately held brokers, publicly held brokers, and all others.
Acrisure again leads in agency acquisitions this quarter
Based on the national data, OPTIS states that Acrisure continued to be the lead buyer across the country with a total of 69 transactions in the first three quarters of the year. The quarterly report notes that this figure is consistent with Acrisure’s acquisition totals for the same periods in 2017, 2018, and 2019.
As for other top buyers this quarter, OPTIS reports the following companies are the most active acquirers with ’15 or more deals in 2020′:
- Broadstreet Partners with 40 deals (up from 26 in 2019),
- Hub International with 28 (37 for the same period in 2019) and,
- Assured Partners with 19 (down from 31 in 2019).
- Newly emerging buyers considered “most active” also include World Insurance Associates LLC with 23 transactions in 2020 (up from 14 in 2019) and PCF Insurance with 22 (up from 4).
On the flip side, there also were two historically active buyers saw a noted drop in active acquisition activity from last year. The first one was Gallagher which saw a decline in acquisitions from 27 to 13, followed by Patriot Growth with a decrease in acquisitions from 23 to 11.
As for those who sold, OPTIS stated in its report that “Sellers are classified as property & casualty brokers, property & casualty and employee benefits brokers, employee benefits brokers, and all others.”
The following reprint from the quarterly report highlights the most active buyers with more than 20 deals in the past 12 months.
Private equity buyers continue to dominate the landscape
With approximately 70% of the total amount of transactions, the private equity-backed/hybrid group of buyers continue to dominate the agency acquisition landscape. Digging deeper into that statistic, OPTIS notes that acquisitions completed by privately held firms increased to 18% of all deals while 9% of deals were conducted by publicly traded firms.
On a final note, the report highlights that 50% of all the total amount of transactions so far this year have involved P&C agency sellers, consistent with the percentage of sales in past years.
“A faster pace of deals has clearly returned, and we expect it to continue given that the supply of both buyers and sellers remains very high, and the clarity of how to manage during pandemic times improves,” said Tim Cunningham, Managing Partner at OPTIS. “The most significant threat going forward is an economic slowdown driven by a much more severe wave of the pandemic and/or failure of a meaningful funding plan for state and local government coming out of Washington.“
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 September OPTIS Partners Report, it can be viewed here: https://optisins.com/wp/2020/10/sept-2020-ma-report/
For those who are looking for more information on the Massachusetts marketplace during Q1-2020, please refer to “Insurance Agency Mergers & Acquisitions In Massachusetts, Q3-2020.”