Public Broker Stocks Down in Dec. as 2007 Closes With 205 M&A Deals

February 24, 2008

Stock Prices: Brokerage stocks mimicked the overall uneasiness of the stock market during January. Hilb Rogal & Hobbs (NYSE:HRH) traded down 11.2 percent while Arthur J. Gallagher traded up 5 percent. Overall the sector was down 8 percent year-to-date.

M&A Activity: As 2007 came to a close, 22 more acquisitions were announced in December. This brought the total number of deals during the year to 205, up 11 percent from 2006 when 185 deals were announced. Middle market brokers, led by Arthur J. Gallagher & Co. (NYSE:AJG) and Brown & Brown (NYSE:BRO), were very active again this year. Gallagher, who made a total of 22 acquisitions in 2007, did not slow down in December with the announcement of five deals, which included targets in Louisiana, Massachusetts, Minnesota and Utah. Not far behind was Brown & Brown, with four acquisitions in Florida, Georgia, New Jersey and Pennsylvania, bringing their total for 2007 to 22 deals also. Wells Fargo & Co. (NYSE:WFC) also made several acquisitions in December, acquiring three targets in California, Minnesota and New Hampshire. In addition to Wells Fargo, two other banks who were actively acquiring agencies in 2007 announced transactions in December. BB&T Corp. (NYSE:BBT) acquired Ott & Co. in Alpharetta, Ga., and Northeast Bancorp (Nasdaq:NBN) acquired Hyler Agency of Thomaston, Maine.

Deal momentum continued into 2008, with 22 more transactions announced in January. Arthur J. Gallagher, Brown & Brown, Hilb Rogal & Hobbs, and Hub International each announced multiple transactions during the month. Barney & Barney, a large private California agency, announced it was combining with Saylor & Hill Co., an Oakland, Calif.-based insurance brokerage. Barney & Barney and Saylor & Hill will each retain their individual names, office locations, staffing and management. The combined entity will be called B&B Company and will have almost 300 employees and oversee more than 25,000 client accounts generating $62 million in annual revenue and representing more than $1 billion in annual premiums.

Capital Raising: Parthenon Capital and Century Capital announced the formation of Ascension Insurance Inc., a start up retail insurance brokerage. The agency plans on building a middle market insurance brokerage by acquiring and growing property/casualty, risk management, and employee benefits brokerages nationwide. Ascension is led by Leonard Kline, who was previously CEO of Compass Insurance Inc. Concurrent with the capital raise, Ascension announced two platform acquisitions: Bryant Wharton & Associates and Pan American Underwriters Inc. Ascension will target property/casualty and employee benefits brokerages with revenue between $5 million and $40 million. The company will utilize a partnership oriented philosophy, where owners become significant shareholders in Ascension and existing management remains in place.

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