M&A Activity Inches Along

By | July 22, 2013

Merger and acquisition (M&A) activity in the second quarter of 2013 mirrored the first, continuing at a leisurely pace. Thirty-six transactions were announced from April to June, compared to 66 during the same time period last year. The year-to-date tally crept to 74, down 44 percent from 2012.

While activity has been muted, there is activity quietly brewing below the surface. Buyers are busy filling their pipelines and seeking opportunities that will provide a specialized niche or competitive advantage. So while the year has been slow to start, we are preparing for a strong finish.

Digital Insurance is the most active acquirer year-to-date with six transactions. Two of these deals came in the second quarter. Also completing two deals in the second quarter were AssuredPartners Inc. and Confie Seguros.

National Financial Partners (NFP) made its first acquisition of 2013 but made a bigger splash with the announcement of its own sale. Chicago-based private equity firm Madison Dearborn Partners LLC completed the deal on July 1, 2013.

Pricing will remain strong for specialty businesses.

One out of every three deals in 2013 has been completed by private equity backed brokers with the top three buyers accounting for the majority. On the seller side, private equity played a part in some headlines of its own. Brown & Brown Insurance acquired Beecher Carlson for $360 million from private equity firm Austin Ventures, FSPM and a group of individual employee and non-employee equity holders.

Public broker activity picked up in the second quarter with Arthur J. Gallagher completing two deals, bringing its total for the year to three. Entering the buyer pool for the first time this year were Willis Group and CBIZ. Willis Group acquired a regional agency in D.C. and seeks to expand its footprint in the Maryland, metro D.C. and Virginia markets.

Employee benefit deals comprised 25 percent of all acquisitions, tracking alongside last year. The buyers were private equity-backed, banks, public equity, independent agencies and insurance companies.

Hub International completed its first U.S.-based deal this year, expanding its Mountain States and Northwest regions.

The top 10 buyers accounted for 30 deals or 40 percent in 2013. That leaves 44 other buyers with one deal each, 34 of them absent from the 2012 market. Competition seems to be growing and that’s good news for sellers. Pricing will likely remain strong for quality firms and specialty businesses.

As the overall economy improves and buyers replenish their pipelines, we expect to see a boost in activity throughout the second half of the year. Deals that can offer strategic growth and expertise will likely present an attractive opportunity.

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.

About Meredith Reeves

Reeves is a senior consultant for MarshBerry. Email: Meredith.Reeves@MarshBerry.com. More from Meredith Reeves

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