Deals for property & casualty and benefits brokers in US and Canada dip 17% in first quarter, OPTIS Partners reports
After the up and down year in merger and acquisitions (“M&A”) activity in 2022, the first quarter of 2023 adds to the continued uncertainty with data showing the lowest first-quarter total for M&A activity since 2019. According to the latest data from OPTIS Partners’ M&A database, there were a total of 158 insurance agency mergers and acquisitions during Q1-2023 representing a 7% reduction from the 5-year average.
“Considering the sharp rise in interest rates and economic uncertainty, it is no surprise that first-quarter activity was lower than last year’s,” said Steve Germundson, a partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.
In comparison to Q1-2022 numbers, M&A activity in Q1-2023 was down 17% from 190 in the first quarter of 2022, according to OPTIS Partners’ M&A database.
“Whether by choice or by necessity, some buyers are standing on the sidelines for the time being. But other well-capitalized firms are still very much in the hunt for M&A,” said OPTIS managing partner Timothy J. Cunningham.
Private equity buyers prevail
The private equity-backed/hybrid group of buyers maintained their dominance in the buying spree with 74% of all transactions for the quarter, while transactions between private parties accounted for 17%.
Broadstreet Partners, Inszone, and Hub were the most active acquirers this quarter
Among buyers, BroadStreet Partners recorded the most transactions in Q1 ’23 with 14 deals, followed by Inszone Insurance Services and Hub International with 10 deals each. Following these three, World Insurance Associates announced nine acquisitions while Boston-based Risk Strategies Company announced eight deals.
As such, BroadStreet, World, and Risk Strategies all completed more than two times the number of transactions than in Q1 2022. Other top buyers were Keystone Agency Partners and Arthur J. Gallagher (seven deals each), Choice Financial Group and Acrisure (six deals each). NFP rounded out the top 10 with 5 transactions.
Some buyers that have been very active over the last five years slowed or shut off activity–including, most notably, PCF, Acrisure, HighStreet Partners, and OneDigital.
The following table outlines those acquirers with five or more deals in Q1-2023:
| Buyer | Buyer Type | Q1-2023 |
|---|---|---|
| Broadstreet Partners | PE-Hybrid | 14 |
| Inszone Insurance Services | PE-Hybrid | 10 |
| Hub International | PE-Hybrid | 10 |
| World Insurance Associates | PE-Hybrid | 9 |
| Risk Strategies Company | PE-Hybrid | 8 |
| Keystone Agency Partners | PE-Hybrid | 7 |
| Gallagher | Public | 7 |
| Choice Financial Group | PE-Hybrid | 6 |
| Acrisure | PE-Hybrid | 6 |
| NFP | PE-Hybrid | 5 |
| Sub-total | 82 | |
| All Others | 76 | |
| Totals for Year | 158 |
P&C Agencies dominate sellers
Property & Casualty sellers accounted for 87 transactions (55% of the total). Benefits agencies sales totaled 13 (8%), and there were 34 sales of P&C/benefits agencies (22%). All other sellers accounted for 24 sales (15%).
“We’re experiencing the other side of a nine-quarter deal bubble that began in Q4 ‘20. The current deal environment may have wavered some with economic changes and looks anemic compared to the bubble years, but there is plenty of evidence to suggest that M&A in the insurance distribution sector will continue at a healthy pace,” Germundson said.
Even though the deal count is lower both compared to Q4 ’22 and Q1 ’22, the comparison to 3- and 5-year historical averages is not as dramatic.
How to access the full report as well as the Q1-2023 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 read by clicking the image below:
For those interested in seeing the latest merger & acquisition activity in Massachusetts and New England, please refer to our proprietary listing, which has been updated as of Q1-2023.
