With the strongest start in the past five years, the first quarter of 2014 carries with it the momentum from the end of last year. With 77 announced transactions, January through March was not only the strongest first quarter in the past few years – it was among the strongest quarters over the past decade.
January began the year with 36 transactions, outshining every month in 2013 with the exception of December, while February remained steady with 25, and March posted a respectable 16. The first quarter is nearly double that of last year. In comparison, 2013 did not hit 77 transactions until we were in the heat of June.
There have been 48 different buyers this quarter with 14 of them completing multiple transactions.
AssuredPartners continued its aggressive growth strategy with eight transactions in the first quarter. With a mix of property/casualty and multiline retail firms as well as wholesalers, AssuredPartners continues to expand its middle market presence. AssuredPartners claimed the most active buyer spot for the first quarter 2014, and is already nearly halfway to its 2013 total of 20.
The public and private equity-backed buyers remained atop the leader board and accounted for half of all transactions occurring in the first quarter.
Arthur J. Gallagher announced six completed transactions in the first quarter followed by Hub International with five. Both buyers are comfortably outpacing last year’s activity. USI Holdings (USI) and Marsh & McLennan Agencies (MMA) each completed three acquisitions, including announcing some very large transactions.
In its largest acquisition to date, MMA made headlines with its acquisition of California-based Barney & Barney. With annual revenue of approximately $100 million, the Barney & Barney acquisition propels MMA’s total revenue to approximately $500 million on a national basis. The move further expands MMA’s footprint and serves as a foundation to build out in the West.
In another big announcement, USI agreed to acquire 42 offices from Wells Fargo, which represents approximately 40 percent of the bank’s brokerage and consulting locations throughout the country. The move broadens USI’s presence in new and existing markets. At the same time, the move supports Wells Fargo’s strategy of growing its core strategic middle-market insurance business.
Brown & Brown announced the acquisition of The Wright Insurance Group, another large deal that made headlines. The acquisition will be a part of the Program Division of Brown & Brown and marks one of its largest acquisitions in the past few years. The transaction, expected to close in April, was announced for a total net consideration of $602.5 million.
The majority of the acquisitions (56 percent) in the first quarter were of P/C firms, followed by multi-line agencies (27 percent) and employee benefit only firms (17 percent).
The wholesale market continues to gather speed with 24 transactions in the first quarter compared to 36 in each of the past two full years. At 31 percent of all activity through March, we expect this segment to continue to be active as buyers seek operations with market access that can drive growth and profitability.
Momentum continues to build for merger and acquisition activity and we remain cautiously optimistic about 2014. There is considerable capital in the market and buyers continue to look for optimal ways to put it to work. Firms continue to search for profitable growth, whether that is achieved by expanding into new markets, developing new niches, or expanding distribution channels. If the first quarter is any indication, we could be in for an active year.
Securities offered through MarshBerry Capital Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Co. Inc. 4420 Sherwin Road, Willoughby, Ohio 44094 (440-354-3230). Except where otherwise indicated, the information provided is based on matters as they exist as of the date of preparation. Past performance is not necessarily indicative of future results.
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