McGriff deal would add significant revenue, staff to Marsh McLennan

Marsh & McLennan Cos. Inc.’s proposed $7.75 billion cash acquisition of McGriff Insurance Services LLC, an affiliate of TIH Insurance Holdings LLC, would make its middle-market platform Marsh McLennan Agency among the largest in the U.S., observers say.

The transaction is expected to close by year-end, subject to regulatory clearance and other standard closing conditions, according to Marsh McLennan.

While Marsh McLennan is already the world’s largest broker, the deal would add scale and talent, observers say.

Charlotte, North Carolina-based McGriff, the retail broking unit of TIH, formerly Truist Insurance Holdings Inc., would add about $1.3 billion in annual revenue to MMA, the small and midsize brokerage unit of Marsh LLC. The deal also would add more than 3,500 employees, including McGriff CEO Read Davis.

Established in 2008, MMA already generates $3.5 billion in annual revenue and had made 124 acquisitions since its inception as of June 30. MMA has more than 10,000 employees and accounts for about half of Marsh’s business in the United States and Canada.

This would be the largest deal MMA has done and would bring its pro-forma revenue to $4.8 billion, Elyse Greenspan, managing director, equity research, insurance, at Wells Fargo Securities LLC in New York, said in a note.

The price, which Ms. Greenspan estimates at a multiple of 20.7 times earnings before interest taxes, depreciation and amortization, is in line with recent similar deals such as Aon PLC’s purchase of NFP, she said.

“It really makes Marsh the dominant middle market broker in the United States,” said Tim Cunningham, managing partner at Optis Partners LLC in Chicago.

The deal would also allow TIH to concentrate on its wholesale brokerage business, he said.

Upon completion of the deal, TIH’s only retail insurance business would be Kensington Vanguard National Land Services LLC, a title insurance and settlement agency, a TIH spokesman said.

TIH’s wholesale brokerage and distribution business, CRC Group, is the largest specialty intermediary in the United States, according to Business Insurance’s most recent ranking.

McGriff is a premier asset, and “there’s every reason to pay top-of-the-market pricing for something as strong and valuable as McGriff,” said Kevin Stipe, CEO of Reagan Consulting in Atlanta.

The deal is more about adding talent than scale, Mr. Stipe said. “This is almost an unprecedented level of talent and quality that you could get in one transaction. And that’s why this is so meaningful to Marsh,” he said.

The addition of McGriff would enhance MMA’s capabilities across commercial property and casualty, employee benefits, management liability, and personal lines, Marsh McLennan said.

“McGriff is a business with excellent leadership, outstanding talent and a record of strong growth. The firm complements Marsh McLennan Agency’s capabilities and culture,” John Doyle, president and CEO of Marsh McLennan, said in a statement issued Monday.

Under terms of the transaction, funded by a combination of cash and debt funding, Marsh McLennan would assume a deferred tax asset valued at about $500 million, according to the statement.

McGriff, Seibels & Williams Inc., the Birmingham, Alabama-based predecessor company to McGriff, was bought by BB&T Insurance Services Inc. in 2003. BB&T’s parent bank merged with SunTrust Banks Inc. to create Truist Financial Corp. in 2019. Truist sold the insurance brokerage unit to an investor group led by private-equity firms Stone Point Capital LLC and Clayton, Dubilier & Rice LLC in two stages. Twenty percent was sold for $1.95 billion in February 2023; the remainder was sold for $10.1 billion this year, and the brokerage rebranded as TIH Insurance.

Stonepoint is also an investor in Alliant Insurance Services Inc. and Higginbotham.

Marsh & McLennan’s 2023 brokerage revenue was $22.35 billion, while TIH reported brokerage revenue of $3.39 billion for the year. Marsh & McLennan and TIH ranked No. 1 and No. 10, respectively, in Business Insurance’s most recent ranking of the world’s largest insurance brokerages. TIH is also the 7th largest brokerage of U.S. business, based on BI’s ranking.