P&C Deals rise 10% in first half of 2021, OPTIS Partners reports
Another quarter, another record. According to the latest data from OPTIS Partners, the first half of 2021 recorded the highest total of insurance agency mergers and acquisitions for this period of time.
“The combination of an increasing number of older agency owners facing a looming increase in capital-gains taxes and an ever-increasing number of buyers in the insurance agency space fueled the boom over the last six months,” said Steve Germundson, partner of OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.
Per the latest data from the report, there were 339 formally announced insurance agency acquisitions during the first half of 2021 (1H-2021), representing an increase of 32 agencies as compared to the 1H-2020 where 307 acquisitions were recorded.
The quarterly OPTIS Partner report includes data covering both 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.’ It breaks down buyers into four distinct groups:
- private equity-backed/hybrid brokers,
- privately held brokers,
- publicly held brokers, and
- all others
Sellers are categorized as follows:
- property & casualty brokers,
- property & casualty and employee benefits brokers,
- employee benefits brokers, and
- all others
Private equity continues to drive the marketplace’s consolidation
Private equity money continues to dominate the majority of insurance agency mergers & acquisitions in 2021. Approximately 66% of all transactions occurring during 1H-2021 stemmed from private equity-backed/hybrid buyers. While this percentage was down from a high of 68% in the first half of 2020, it is still represents well more than half of all of the agency mergers & acquisitions occurring so far this year.
“In some ways the M&A story is familiar: more private equity-backed buyers with access to large amounts of cheap capital continue to fuel the pace of M&A and all-time high valuations. An interesting development is the rise in privately-owned agency activity, accounting for a quarter of the deals done,” said Dan Menzer, partner at OPTIS.
Alternatively, publicly traded brokers acquisitions dropped from 10% to 5% this year, while privately held firms completed about 24% of the transactions in the first half of 2021, up from 17% in the same period last year.
As for P&C sellers, OPTIS Partners estimates that they accounted for 188 of the total 339 transactions (55%), consistent with their percentage of the totals in recent years.
Acrisure continues to outstrip all other national acquirers
Leading with 31 transactions so far this year, Acrisure had far and away more deals than any other insurance agency buyer in the U.S. during the 1h-2021. While an impressive number, Optis Partners does note that this figure is 21% below their five-year average for this same reporting period.
As for the other major buyers, these include PCF Insurance with 22 deals (up from 13 in 2020), AssuredPartners with 21 (up from 19), BroadStreet Partners (19, down from 30) Hub International rounded out the Top 5 with 17 transactions in 2021 (down from 28).
Finally, Optis Partners concludes that four of the top 10 buyers actually completed fewer deals in the first half of 2021 versus 2020. These companies were as follows: BroadStreet and Hub each declined by 11; Acrisure completed 8 fewer deals, while The Hilb Group had one fewer deal. In contrast, Relation Insurance, High Street Partners, and Alera each more than doubled the number of transactions completed.
| Top Buyers | Deals Announced Q1-2020 | Deals Announced in 1H-2021 |
|---|---|---|
| Acrisure | 108 | 31 |
| PCF Insurance | 36 | 22 |
| Assured Partners | 38 | 21 |
| Broadstreet Partners | 58 | 19 |
| Hub International | 65 | 17 |
| World Insurance Associates | 42 | 16 |
| Relation Insurance | 11 | 14 |
| High Street Partners | 9 | 13 |
| Alera Group | 18 | 12 |
| The Hilb Group | 22 | 9 |
| Gallagher | 23 | 9 |
| All Other | 361 | 156 |
Optis Partners’ final prediction: ‘More to come in 2021’
“We expect the deal count to rise through the end of 2021 as more owners look to avoid tax increases, and we may see an increase in the number of large transactions as more buyers need larger deals to move the growth meter,” said Tim Cunningham, managing partner. ”We also expect a continual increase in deals done between privately owned agencies of all sizes.”
How to access the full report
The OPTIS Partners report is based on its own proprietary database tracking which are the most active acquirers and other announced transactions. As such, while it is a reasonably accurate indication of deal activity in the sector, it is highly probable that the actual number of agency acquisitions was far greater than the total number reported. One simple reason for this result is that many buyers and sellers do not report transactions at all, while other acquirers omit reporting small transactions. Access the report by click the image below:
For those who are looking for more information on the Massachusetts marketplace during Q1-2021, please refer to our updated “Insurance Agency Mergers & Acquisitions In Massachusetts | Q2-2021” listing here.
