There were 165 announced merger and acquisition transactions of insurance agencies in the U.S. and Canada in the first six months of 2014, a jump of nearly 40 percent over the same period in 2013.
Also, according to an OPTIS Partners’ survey, it was the most active first half since the firm began tracking merger and acquisition (M&A) transactions in 2008.
The insurance M&A advisory firm and investment bank thinks there’s more to come.
“We predict there will be robust M&A activity going forward as more agencies owned by retiring Baby Boomers continue to go to market,” said Timothy J. Cunningham, managing director of OPTIS. “It looks like the first half of 2014 is the start of a prolonged active period for agent-broker M&A transactions. The agency-brokerage business is awash with Baby Boomer principals. It’s estimated that more than 30 percent of all the equity in the system is owned by them.”
The report covers property/casualty agencies, agencies selling both property/casualty and employee benefits, and employee benefits agencies.
Private-equity-backed firms were the most active buyers year-to-date, accounting for 67 agency purchases. They were followed by privately owned agencies and brokers (54 deals), publicly held brokers (27 deals), banks (nine deals) and insurance companies/others (eight deals).
The 54 transactions by private agencies equaled the number from the second half of 2012 and was second only to the 58 deals in the first half of 2008, according to OPTIS.
In the five years ending December 31, 2012, acquisitions closed by private-equity-backed firms accounted for 28 percent of the total. For the period since December 31, 2012,they were up to 42 percent of the total number of deals.
Cunningham said that many in the industry have not adequately addressed perpetuation or succession planning and that without a plan in place, many aging principals are forced to sell to a third party—often private equity-backed and public brokers—to capitalize the value of their agency.
The full report can be read online at http://optisins.com/articles/M&A_Report-June_2014.pdf.