Accession buy will add significant specialty revenue to Brown & Brown

Brown & Brown Inc. will acquire a significant amount of middle-market specialty business and take its annual revenue over $6 billion with its proposed $9.83 billion purchase of the parent company of Accession Risk Management Group.

The deal announced Tuesday includes Boston-based Accession’s retail brokerage unit Risk Strategies Co. and wholesaler One80 Intermediaries, which will add about $1.7 billion in revenue to Brown & Brown.

The deal is expected to close in the third quarter.

Private equity-owned Accession, which was the 14th largest broker of U.S. business last year, according to Business Insurance’s most recent ranking, will add about 5,500 staff to Brown & Brown, taking the combined firms’ total employees to about 21,000. Accession reported $600 million in earnings in 2024.

The deal will be 86% cash and 14% in stock, and Brown & Brown plans to raise $4 billion in equity and $4 billion in debt to fund the deal. The publicly traded broker will have a leverage ratio of about 3.4 times after the issuance.

Brown & Brown, the world’s sixth largest brokerage, has been an active acquirer of rivals for decades, including some larger deals, but Accession would be its largest acquisition.

Risk Strategies was formed in 1997 as a risk management consulting firm and built a significant specialty business, and One80, formed in 2019, added delegated underwriting business, said John Wepler, chairman and CEO of Woodmere, Ohio-based mergers and acquisitions consultancy Marsh, Berry & Co. Inc.

Approximately 70% of Accession’s business comes from Risk Strategies and 30% from One80. The company has made approximately 190 acquisitions since its formation. Brown & Brown is about 60% retail and 40% wholesale.

“It’s a really strong move by Brown & Brown, because what we’re in the middle of in the industry is technology is coming together with data analytics and capital to create extreme specialization,” Mr. Wepler said.

Like larger brokers, middle-market brokers are placing more emphasis on data and analytics, said Timothy J. Cunningham, managing partner at Optis Partners LLC in Chicago.

“They are attempting to leverage technology and data, and the more middle-market business you have, the more you can deploy your technology over a bigger platform,” he said.

Such moves can improve earnings by significant dollar amounts, Mr. Cunningham said.

The deal helps Brown & Brown move closer to its “intermediate goal” of surpassing $8 billion in revenue, J. Powell Brown, president and CEO of Brown & Brown, said on a call with analysts. Brown & Brown reported $4.8 billion in revenue in 2024.

“This acquisition combines two highly compatible businesses with entrepreneurial sales-based cultures that are deeply embedded in our local communities,” he said.

The companies do not have significant overlaps of concentration in specific areas, Mr. Brown said. Accession’s strengths include agriculture, health care, private equity, reinsurance and captives, he said.

The purchase price represents 12 times earnings before interest, taxes, depreciation, and amortization, including expected synergies, but the headline number without the synergies is 16.4 times EBITDA, Mr. Wepler said.

“That’s a really strong number,” he said.

Brokerage valuations are bifurcating depending on the size and sophistication of the company, said Phil Trem, president of MarshBerry.

“That kind of mid-to-high 15s into the low-to-mid 16s appears to be the range for quality, valuable organizations,” he said.

Companies whose growth is more tied to insurance market pricing, though, are selling for lower multiples, Mr. Trem said.

The deal is another example of a publicly traded brokerage buying a significant middle-market rival. Last year, Aon PLC bought NFP Corp. for $13 billion, Marsh LLC bought McGriff for $7.75 billion and Arthur J. Gallagher & Co. announced it planned to buy AssuredPartners Inc. for $13.45 billion, though that deal has not yet been completed.