Deals for property & casualty and benefits brokers in US and Canada dip 18% YTD, OPTIS Partners reports
While results from Q4-2023 were thought to “bode well” for mergers & acquisition activity in 2024, those predictions may have been a bit premature based on the latest report from OPTIS Partners. According to OPTIS Partners’ M&A database, there were 155 announced insurance agency mergers and acquisitions in the first quarter of 2024, representing an 18% decrease in activity from the 188 acquisitions recorded during the same period in 2023.
“On a trailing 12-month basis, we’re back to levels that we last witnessed at the end of 2020,” said Steve Germundson, a partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.
In fact, these results mark the slowest quarter in 15 quarters, since the second quarter of 2020, in the depths of the pandemic. Five consecutive quarters have fallen below the long-term trend line from a deal-count perspective.
It is important to note, however, that a few big buyers pulling back appears to have had an outsized impact. For example, the historically active buyers, High Street Partners, Acrisure, Patriot Growth Insurance Services, and Risk Strategies all had fewer deals in Q1-2024 versus Q1-2023.
“Although a few very active buyers have stood down over the past year to integrate operations, bolster balance sheets, or reconsider their strategy, a healthy number of buyers are still pursuing deals,” said OPTIS managing partner Timothy J. Cunningham.
BroadStreet and Hub lead buyers
BroadStreet Partners increased its pace and recorded the most transactions in Q1 2024 with 29 deals, followed by Hub International at 12, Inszone Insurance Services at 10, and Keystone Agency Partners at eight. Other top buyers were Arthur J. Gallagher and OneDigital with seven deals each, and ALKEME and Leavitt Group with five deals each. Each of the eight most- active buyers in Q1 either matched or increased their deal count over Q1 2023.
Alternatively, leaders in Q1-2023 who are less active in the YTD in 2024 included World Insurance (eight fewer), Patriot Growth (seven fewer), and several firms with five fewer (Choice Financial Group, The Hilb Group, and NFP).
Past perennial leaders Acrisure and PCF accounted for 47% of the overall decline in deal count over the past 12 months. Notably, it took an increase from 11 firms to make up for this deficit.
There were 116 distinct buyers in Q1 2024 compared to 148 in Q1 2023.
Private equity buyers continue to dominate
As mentioned in previous reports, the private equity-backed/hybrid group of buyers continued to drive the overall deal activity in the U.S. In Q1-2024, for example, private equity deals represent 71% of all transactions for the quarter.
Moreover, this group is comprised of 26 firms, only one of which completed its first transaction in Q1 of 2024. Transactions between private parties accounted for 21% of the deals done by 24 distinct firms, 10 of which did their first transaction in Q1 ‘24.
Active acquirers with five or more deals in Q1-2024
| Buyer | Q1-2019 | Q1-2020 | Q1-2021 | Q1-2022 | Q1-2023 | Q1-2024 |
|---|---|---|---|---|---|---|
| Broadstreet Partners | 9 | 16 | 12 | 5 | 14 | 29 |
| Inszone Insurance Services | 4 | 2 | 12 | 8 | 12 | |
| Hub International | 12 | 17 | 13 | 14 | 6 | 10 |
| Keystone Agency Partners | 2 | 3 | 7 | 8 | ||
| OneDigital | 2 | 8 | 3 | 9 | 5 | 7 |
| Gallagher | 12 | 6 | 4 | 4 | 7 | 7 |
| ALKEME | 5 | 3 | 5 | |||
| Leavitt Group | 1 | 2 | 3 | 4 | 5 | 5 |
| Sub-totals | 36 | 53 | 39 | 56 | 55 | 83 |
| All Others | 119 | 125 | 137 | 142 | 133 | 72 |
| Totals for Year | 155 | 178 | 176 | 198 | 188 | 155 |
P&C Agencies dominate sellers
P&C sellers accounted for 106 transactions (62% of the total). Benefits agencies sales totaled 12 (13%), and there were 19 sales of P&C/benefits agencies (11%). All other sellers accounted for 18 sales (15%).
Demand stays strong
The increased number of active buyers is providing support to both the number of deals done and the values paid.
“The industry had 26 private equity-backed buyers, 24 privately owned buyers, and three publicly traded brokers doing deals in Q1 ’24,” Germundson said. “There is still a lot of capital looking to deploy in this space. What has changed to some degree is the discipline of some of the active buyers who don’t appear to be chasing deals as in the past.”
Cunningham added: “This strength on the demand side and the perceived depletion of quality firms on the supply side is propping up values for the better firms despite economic fundamentals that have changed materially over the past two years. We don’t expect this to change any time soon.”
How to Access the Latest Report
The OPTIS Partners report is based on its own proprietary database tracking which are the most active acquirers and other announced transactions. So, 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 to the full report is available by clicking the above image or by clicking this link: https://optisins.com/wp/2024/04/q1-2024-ma-report/.
