There were 288 announced insurance agency mergers and acquisitions during the first half of 2020, down from 328 in 2019, according to a report from OPTIS Partners. It was the lowest six-month period total since 2017.
“Some of the active buyers continued to push forward with their M&A strategy while others have slowed their acquisition pace until more is known about the impact and duration of the pandemic,” said Timothy J. Cunningham, managing partner of OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.
Private equity-backed/hybrid buyers increased their share of deals slightly compared to last year, the report notes.
Acrisure led all buyers with 39 transactions in the first half-year, consistent with their total in 2019. Other top buyers were Broadstreet Partners with 30 deals (up from 17 in 2019), Hub International and Assured Partners (both with 19 but down from 26 and 20, respectively), and World Insurance Associates LLC with 12 transactions in 2020 (up from 8 in 2019).
Several other historically active buyers saw their transaction count drop substantially through six months in 2020. Gallagher declined from 16 to eight; Alera Group decreased from 11 to five, and NFP Corp. dropped from nine to two.
The data covers U.S. and Canadian agencies selling primarily property/casualty insurance, agencies selling both P/C and employee benefits, and those selling only employee benefits. The report from OPTIS breaks down buyers into four groups: private equity-backed/hybrid brokers, privately held brokers, publicly held brokers, and all others. Sellers are classified as property/casualty brokers, property/casualty and employee benefits brokers, employee benefits brokers, and all others.
Private Equity Buyers Dominate
The private equity-backed/hybrid group of buyers increased their share of all transactions compared to the first half of 2019, accounting for 69% of all transactions vs. 65% last year. Acquisitions by the publicly traded firms, which dropped from 33 transactions in 2019 to 30 in 2020, were buoyed by the nine transactions completed by the new public firm Baldwin Risk Partners.
P/C sellers accounted for 143 of the total 288 transactions (50%), consistent with their percentage of the totals in recent years.
“We expect the slow-down to continue given the recent explosion of the COVID-19 infections and anticipated reinstatement of various social and business restrictions,” said Daniel P. Menzer, partner at Chicago-based OPTIS.
Menzer said that until businesses can return to some degree of normalcy, buyers are unlikely to be able to accurately assess the short-term and long-term impact of this pandemic, making acquisitions much riskier for them.
Source: OPTIS Partners
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