After a sluggish start to the year, merger and acquisition (M&A) activity gained some momentum in the third quarter. With 55 transactions announced from July to September, the third quarter comprised 42 percent of the total 132 deals for the year. [See Figure 1]
While the year-to-date count is off from last year’s mark of 192, there were some large deals that kept the industry buzzing.
The most active acquirers of the year were all busy in the third quarter. The top six buyers, each with five or more acquisitions in 2013, completed 21 deals in the third quarter, half of the total 42 transactions for the year.
Confie Seguros completed five deals in the third quarter alone, raising its year-to-date mark to nine. Its latest acquisition of the retail agency of Affirmative Insurance Holdings Inc. establishes a platform in the Midwest and Southeast, allowing for continued strategic growth.
AssuredPartners Inc. continues to be one of the fastest-growing brokerages, completing three deals and raising its year-to-date mark to nine, followed by Digital Insurance with eight deals.
Hub announced six U.S.-based deals, and INSURICA Insurance Management Network completed five deals, its first acquisition in more than two years. INSURICA had been quiet since 2011 when it nearly doubled the size of its agency with the acquisition of Guaranty Insurance Services.
Private equity continues to drive the M&A market with 40 deals, or 30 percent of all buyer activity, and accounted for some of the largest deals this year.
Hub International entered into an agreement with private equity firm Hellman & Friedman LLC, a recapitalization valued at approximately $4.4 billion. The deal enables Hub to continue its growth strategy and expand its capabilities. Hub was originally taken private by Apax Partners and Morgan Stanley Principal Investments in 2007.
Hub added nine deals in Canada since January, bringing the total to 15 for all U.S. and non-U.S.-based deals.
Another buyer expanding outside of the United States is Arthur J. Gallagher (AJG). AJG completed one acquisition in Canada and expanded its presence in the United Kingdom with three, including the Giles Group of Cos. for $364 million. The combined operation will employ approximately 3,100 across 70 offices.
AJG also made headlines with its expansion in the Northeastern United States. In a deal valued at approximately $276.5 million, AJG announced the acquisition of Bollinger, a top 100 broker. The deal expands AJG’s footprint in the Northeast and is expected to generate more than $100 million in annualized revenue. Bollinger was previously owned by private equity firm Evercore Capital Partners.
Public brokers completed 13 deals through September, down from 40 during the same period last year. Privately owned broker activity dropped from 55 to 49 completed deals, while bank activity totaled 11, flat to last year.
On the seller side, 39 percent of all acquisitions were of property/casualty brokers, and 35 percent were multiline, P/C and benefits agencies. The remaining 26 percent were benefits firms, compared to 28 percent of all firms through the third quarter 2012.
While M&A activity has been relatively calm after the storm of activity that closed 2012, prospects continue to fill the pipelines and deals are coming to completion. Although we are unlikely to set any new records this year, we believe that buyers will continue to need the growth acquisitions provide, and deal activity will likely strengthen. The appetite among buyers remains strong, and as we have been seeing, this is helping to keep valuations high and attractive to sellers.
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