Mergers and acquisitions activity among North America’s insurance agents and brokers continued to slow in the first half of this year, matching levels last observed in 2017.
The marketplace is a mixture of buyers. Some have slowed their M&A activity to focus on integration or strengthening their balance sheets, while others have picked up the pace. This is the natural progression of a consolidating industry where the supply is shrinking and demand remains high for those still looking to amass volume.
The total number of U.S. and Canadian transactions involving property/casualty agents and brokers, benefits brokers, managing general agents and third-party administrators during the first half of this year fell 23% to 299 from 384 during the same period last year and was 21% below the previous five-year average.
On a quarterly basis, there were 146 transactions during the second quarter, down 26% from the 196 reported in the same period in 2023. On a trailing 12-month basis, the latest deal count was 736, significantly lower than the 821 reported for all of 2023 and the 940 reported for the prior trailing 12-month period.
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Among the sellers in the first half, 63% were retail property/casualty agencies and 12% were employee benefits specialists, while 11% were classified as selling both. The remaining 14% of sellers comprise those on the wholesale side of distribution, third-party administrators, life insurance agencies, financial products sellers, and a variety of consulting businesses related to insurance distribution.
Private-equity-backed companies continue to dominate the deal-making landscape, and we don’t see this changing for many years ahead. These buyers accounted for 74% of the transactions so far this year, which is similar to past experience. Those companies categorized as privately owned accounted for 15%.
BroadStreet Partners Inc., Inszone Insurance Services, and Hub International Ltd. continue to be the frontrunners, reporting first-half deals of 46, 28 and 26, respectively. While Hub’s pace continued to slow somewhat — down off 10% compared with the comparable 2023 period — BroadStreet increased its activity by 77% and Inszone was up 47%. Each of the remaining top 10 most-active buyers nearly matched their pace from the prior year period with one exception: PCF Insurance Services, which had largely sat out the M&A market for more than a year, has begun making acquisitions again, recording eight transactions so far this year. This puts them in the eighth spot on the active buyer list.
In total, the top 10 most-active buyers — and ties — booked 65% of the announced transactions so far in 2024, and 49 buyers booked the remaining 35%. In total, 28 buyers did more than one transaction in the first half, and 12 reported making their first acquisition.
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Historically active buyers whose transaction count dropped below their five-year average included Acrisure LLC, PCF and Hub. At the other end of the spectrum, BroadStreet, Inszone and Keystone Agency Partners LLC doubled or more their previous five-year average pace.
So far in 2024, large transactions include the completion of Aon PLC’s acquisition of NFP Corp., and TIH Insurance Holdings LLC’s sale of the remaining 80% equity held by Truist Financial Corp. to a consortium of private-equity investors led by Stone Point Capital. In April, Marsh McLennan Agency acquired a top 100 agency, Fischer Brown Bottrell, from Trustmark National Bank.
The industry is clearly in a state of change regarding the M&A landscape. A large amount of capital continues to pursue investment opportunities in this sector, reflecting the number of buyers making their first acquisition.
As the supply continues to shrink, several things are likely to happen. One is that the relatively high value of businesses will continue to be supported, particularly for the better companies. The second is that the number of large transactions should rise as the largest organizations look for opportunities to continue strong revenue growth. Lastly, though not reflected in these numbers, multiple organizations have indicated that they are working on initial public offering initiatives.
We anticipate deal activity picking up somewhat in the second half, though at a lower level than in recent years. Looking out longer term, industry M&A activity is likely at a new normal pace.
Steven E. Germundson, Timothy J. Cunningham and Daniel P. Menzer are principals at Optis Partners LLC, an investment banking and financial consulting firm in Chicago and Minneapolis that serves the insurance distribution sector. Mr. Germundson can be reached at [email protected] or 612-718-0598; Mr. Cunningham can be reached at [email protected] or 312-235-0081; Mr. Menzer can be reached at [email protected] or 630-520-0490.
