Insurance Agency Mergers & Acquisitions Hit Record Level in 2018, OPTIS Partners' Report Says

Agency M&A deals in U.S. and Canada inched higher in 2018, led once again by private equity/hybrid buyers

CHICAGO, IL / ACCESSWIRE / January 29, 2019 / Mergers and acquisitions of insurance agents and brokers last year broke several records in 2018, according to OPTIS Partners' annual report. The OPTIS database logged a record 626 deals in the United States and Canada in 2018, including 330 transactions in the second half of the year and 148 transactions during the fourth quarter.

There were 611 M&A deals in 2017, previously the most active year.

'The M&A market for insurance agents and brokers continues to surprise and exceed expectations,' said Timothy J. Cunningham, managing director of OPTIS, an investment banking and financial consulting firm specializing in the insurance industry. 'There are no signs of anything changing in the near term either.'

The report covers firms selling primarily property-and-casualty insurance, both P&C and employee benefits, and employee benefits agencies.

Private equity/hybrid buyers accounted for 424 transactions, representing 68 percent of the total, compared with 383 transactions and 63 percent in 2017.

'The concentration of PE/hybrid buyers has grown steadily since we began tracking deals in 2008 when only 21% of the transactions involved private equity buyers,' he said.

The top five buyers were Acrisure (101 acquisitions), Hub International (59), AssuredPartners (37), Gallagher (36) and Broadstreet Partners (34). All were in in the PE/hybrid category except publicly owned Gallagher.

Privately owned firms completed 107 transactions in 2018, down from 137 acquisitions in 2017. This was the first decrease from this group since 2013.

P&C Agencies Were Top Sellers

By seller type, property-and-casualty-focused agencies dominated the list. They accounted for 345 of the 2018 transactions, 55 percent of the total. Employee benefits brokers accounted for 146 transactions, 23% of the total, but were down from the 174 recorded in 2017

There were 142 unique buyers in 2018, down from 177 in 2017 and the lowest total since 2014. At the same time, the top 10 buyers in 2018 accounted for 62 percent of the number of transactions compared to only 56 percent in 2017 and 52 percent in 2016.

Some key takeaways from this year's results include the following, according to Daniel P. Menzer, partner:

• Buyers continue to find attractive agencies to acquire
• Agency valuations continue to creep upwards, pushing revenue and EBITDA multiples to levels seldom if ever seen before
• Internal perpetuation is a challenge because of the increasing gap between the value third-party buyers are willing to pay and internal transaction values. Many owners find these values very compelling.
• Equity and debt capital remain plentiful to fund PE/hybrid buyers.
• Finally, as we've said in the past and strive to reinforce every day with our clients:
  • If you're a buyer, pay attention to cash flow and be careful not to overpay.
  • If you're a seller, identify the best cultural and operational fit. Take advantage of strong pricing before things change.
  • If you're neither, ignore all the hype and run your business like a business and strive for improvement every day.

The OPTIS database tracks a consistent pool of the most active acquirers and other announced transactions, and is, therefore, a reasonably accurate indication of deal activity in the sector.

'The actual number of agency acquisitions was far greater than the number reported, as many buyers and sellers do not report transactions, and some acquirers do not report small transactions,' Cunningham said.

The full report, 2018 Agent & Broker Mergers & Acquisition Update, can be read online at http://optisins.com/wp/2019/01/december-2018-ma-report.

OPTIS (www.optisins.com) was ranked as the fourth most active agent-broker M&A advisory firm in 2017 and 2018 and the fifth most active in 2014, 2015 and 2016 by SNL Financial.

Focused exclusively on the insurance distribution marketplace, Chicago-based OPTIS Partners offers merger & acquisition representation for buyers and sellers, including due-diligence reviews. It provides appraisals of fair market value; financial performance review, including trend analysis and internal controls; and ownership transition and perpetuation planning.

Total agency mergers and acquisitions by year, US and Canada, 2008-2018

Contact:

Tim Cunningham, OPTIS Partners, [e-mail], 312-235-0081

Dan Menzer, OPTIS Partners, [e-mail], 630-520-0490

Henry Stimpson, Stimpson Communications, 508-647-0705, [e-mail]

SOURCE: OPTIS Partners

View source version on accesswire.com:
https://www.accesswire.com/533759/Insurance-Agency-Mergers-Acquisitions-Hit-Record-Level-in-2018-OPTIS-Partners-Report-Says