Deals for P&C and benefits brokers in United States and Canada are down this year, but last two quarters have bucked the trend, OPTIS Partners reports
The third quarter of 2024 (Q3-2024) results are in and offer a glimmer of hope that the overall decline in deal activity appears to be “leveling off.” |
“Some may call the deal flow today as the ‘new normal’ though we’re more likely to call it the ‘old normal,’ explained OPTIS managing partner Timothy J. Cunningham addeding, “Deal volume is still off from the peak, but it is also still above pre-2021 flow.”
According to the latest data from OPTIS Partners’ M&A database, during Q3-2023, 198 deals were announced, representing a 14% increase from 173 in Q2 and up 21% from 164 in Q1. In terms of year-to-date deal volume, there have been 535 announced insurance agency mergers and acquisitions representing a 10% decrease from the 594 transactions logged in the same period in 2023. As a result, deal activity is now 11% below the previous five-year average.
“Nevertheless, we’ve seen two quarters of increasing deal count after six consecutive quarters of the count falling,” said Steve Germundson, a partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry. “While two quarters do not a trend make, we believe that we’re at or near the bottom of the deal-flow trough.”
Private equity-backed/hybrid brokers dominate buyer group
The private equity-backed/hybrid group of buyers maintained its dominance with 73% of all acquisitions for the quarter, while transactions between private parties accounted for 17%. Publicly held brokers and all others accounted for just 10% of deals.
Among the most active buyers in 2024, BroadStreet Partners led the industry with 68, which is 51% higher than what it recorded in the same period last year and twice its previous 5-year average.
Hub and Inszone followed with 39 and 38 deals, respectively. While Hub’s pace of deal-making is 13% below the prior year, Inszone’s pace has increased significantly each year since 2020 when it did four deals. Patriot Growth rounded out the top four and nearly doubled its transactions over the prior year.
There were 87 unique buyers in insurance-distribution-related businesses through the first three quarters of 2024, 71 of which did fewer than ten transactions and 41 of which did just one. Twenty-five of these firms announced their first acquisition.
The 10 most active acquirers accounted for 292 deals (55% of the total). All of these were private-equity-backed firms other than Leavitt Group (private) and Arthur J. Gallagher (publicly traded).
Top 10 Acquirers (including ties) YTD in 2024
| Buyer | 2020 | 2021 | 2022 | 2023 | Q1-Q3 2024 |
|---|---|---|---|---|---|
| BroadStreet Partners | 40 | 31 | 23 | 45 | 68 |
| Hub International | 40 | 38 | 54 | 45 | 39 |
| Inszone Insurance Services | 4 | 6 | 24 | 33 | 38 |
| Patriot Growth Services | 13 | 22 | 19 | 17 | 32 |
| Leavitt Group | 8 | 13 | 15 | 27 | 24 |
| Keystone Agency Partners | 7 | 10 | 20 | 19 | 22 |
| ALKEME | 0 | 2 | 8 | 11 | 18 |
| OneDigital | 17 | 14 | 14 | 14 | 18 |
| AssuredPartners | 26 | 32 | 19 | 17 | 17 |
| Gallagher | 14 | 14 | 15 | 25 | 16 |
| Subtotal | 169 | 182 | 211 | 253 | 292 |
| All Others | 327 | 507 | 518 | 341 | 243 |
| Totals for Year | 496 | 689 | 729 | 594 | 535 |
P&C agencies most often bought
“We continue to see a large number of potential sellers in the industry, both long-established agencies owned by baby boomers as well as those that started up in the last five to 10 years. That certain level of regeneration is an interesting dynamic, and often those firms are showing real organic growth,” Germundson said. “A stabilizing economy is also empowering buyers, both established and those looking to enter the market.”
P&C sellers accounted for 349 transactions (65% of the total). Benefits agencies sales totaled 75 (14%), and there were 52 sales of P&C/benefits agencies (10%). All other sellers accounted for 59 sales (11%). Firms that fall into the life insurance/financial services area are included in the “other” category and did 18, or 3%, of the total transactions.
Cunningham pointed out: “We see more significant changes in the buyer community to come. On the heels of some large acquisitions in 2024 such as AON’s purchase of NFP and Marsh McLennan Agency’s announced acquisition of McGriff Insurance Services, we look for more large deals to be announced as the big firms chase growth.”
In addition, he predicted that there likely will be several recapitalizations of private equity-backed firms following in the footsteps of Axis Insurance Managers and Sunstar Insurance Group earlier in 2024, he predicted. Most likely a couple more agencies will be going public, as The Woodlands Financial Group did earlier this year.
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