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There will be a strong ongoing interest in acquisitions of independent agent and brokers through 2012, according to the channel’s most prolific buyers of agencies whose views are highlighted in a new report.
Reagan Consulting’s report features perspectives of seven of the industry’s most active acquirers.
Reagan Consulting says the consensus on continuing deals is reflected in the comments of one buyer who described his firm’s acquisition activity as “prolific, but disciplined.”
The report includes the opinions of Dave Eslick, chairman, Marsh & McLennan Agency; Wade Reece, chairman and CEO, BB&T Insurance Services; Pat Gallagher, chairman and CEO, Arthur J. Gallagher; Mike Sicard, chairman, president and CEO, USI; Powell Brown, CEO, Brown & Brown; Dave Zuercher, executove vice president and group head, Insurance Services, Wells Fargo; and Marty Hughes, chairman and CEO, Hub International.
The executives see continued appeal for firms offering one or more characteristics based on strategic goals: a mix of employee benefits and property/casualty, additional geographic coverage, new areas of expertise, or strong cultural and strategic fit with existing operations.
“There is really no limit on the type of operations that we would be interested in acquiring,” Eslick says.
The principals in the Reagan report also share what they believe is vital for industry growth overall, particularly development of expertise and value-added service to customers.
“While having a solid relationship with the client is important, it is not enough,” Reece says. “Understanding the client’s business intimately to help the client achieve his goals is becoming more and more critical.”
They also underscore the importance of attracting and retaining new talent, a hurdle Gallagher characterizes as the industry’s “single biggest challenge.”
Although property/casualty revenue remains a fundamental element of many acquisitions, an employee benefits book remains attractive. The executives emphasize the changing environment and generally agree that the appeal of accounts with fewer than 100 lives is waning.
Nevertheless, agencies delivering a demonstrated level of expertise in this complex field hold particular appeal for acquirers. “Healthcare reform has created a fundamental set of changes plus a state of ‘perpetual uncertainty,'” Sicard says. “Perpetual uncertainty on behalf of clients means a critical role for the right broker/consultant/advisor.”
This need for expertise not only in employee benefits but also in all specialties is expected to drive industry growth well into the future and fuel continued acquisitions, the Reagan report documents. The panelists share uniform optimism for both their own firms and the industry at large. “The world is getting riskier. The need for risk consultancy and risk mitigation will only continue to grow,” Gallagher says.
The report, “M&A Perspectives from the Most Active Acquirers,” is available from Reagan Consulting.