Agency M&A in 2013 Reverted to Norm After Busy 2012: OPTIS Partners

March 13, 2014

Mergers and acquisitions of insurance agencies fell in 2013, with 248 reported transactions in the United States and Canada, according to a new semi-annual survey by OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.

In 2012 there were a record 299 transactions, as sellers strived to close deals before higher capital gains taxes kicked in in 2013, OPTIS Partners said.

“Last year marked a return to normal levels as buyers assimilated all their 2012 deals and began to refill the pipeline of potential target sellers,” said Timothy J. Cunningham, managing director of OPTIS Partners.

Data is for U.S. and Canadian transactions in the insurance “distribution sector,” including retail property/casualty, employee benefits and life/financial services, wholesale including MGA/MGU, third party administrators (TPAs) and other related entities.

Private-equity backed agencies were 2013’s biggest buyers, making 94 acquisitions compared to 88 in 2012, the survey found.

“It was a seminal shift in the landscape, as PE-backed acquirers topped the chart for the largest number of transactions for the first time,” Cunningham said. The top PE-backed buyer was Hub International, which made 25 acquisitions.

PE-backed buyers were followed by privately owned insurance agencies (85), public brokers (33), banks (27), and all others, including carriers (9), according to the survey.

The survey found that, on the seller side, sales of property/casualty-focused agencies dominated, with 42 percent of all sales. Deals for agencies selling both P&C and employee benefits accounted for 22 percent of transactions. Employee benefits agencies accounted for 24 percent of sales, and other, 12 percent.

Looking at the acquisitions quarter-by-quarter, the 2013 M&A activity was a roller coaster, the survey said. The year started strong early from the late reporting carryover from 2012. It then “fell off a cliff” in the middle of the year then finished with a flourish in one of the most active fourth quarters in the last six years.

2014 Starts Strong

OPTIS Partners said 2014 is off to a strong start. January 2014 was one of the most active months on record for closed deals, Cunningham said. “The January flurry follows the very robust fourth quarter of 2013,” he observed. “Such momentum seems to indicate 2014 will be a very active year.”

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Chart courtesy of OPTIS Partners

Chart courtesy of OPTIS Partners

Chart courtesy of OPTIS Partners

 

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