Mergers and acquisitions of insurance agencies skyrocketed in 2017, rising 31 percent from 2016's 461 deals to hit 604 deals last year.
Insurance Journal's report, based on numbers from OPTIS Partners, says the statistics cover agencies selling primarily property/casualty insurance, agencies selling both P/C and employee benefits, and employee benefits agencies.
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"This whopping increase exceeded expectations," Timothy J. Cunningham, managing director of OPTIS, is quoted saying in the report, adding, "We expect the beat to go on in 2018."
In 2017, OPTIS finds, private equity/hybrid buyers accounted for 382 transactions, 63 percent of the total, compared with 56 percent in 2016. This latest report lists PE/hybrid as a new buyer category that includes all private-equity-backed buyers in addition to some privately owned buyers with material internal or external financial support for acquisitions.
"The concentration of PE/hybrid buyers has grown steadily since we began tracking deals in 2008 when only four of the top 10 buyers had private equity backing," Cunningham adds. All but one of the top five buyers is in the PE/hybrid category: Acrisure, with 92 acquisitions; Hub International, with 49; Alera Group, with 38; Broadstreet Partners, with 32; and the publicly owned Gallagher, with 30.
Employee benefits brokers accounted for 174 transactions, 28.8 percent of the total, nearly a 90 percent increase from 2016, with Cunningham saying in the report, "The explosion in employee benefits agency sales was fueled by Alera, Acrisure, and several other active acquirers."
P/C agencies dominated with 301 transactions, making up 49.8 percent of the total, while agencies selling both P/C and employee benefits coverages were sold in 86 deals; 43 sales fell into the "other" category, which includes managing general agents, third-party administrators and other types of sellers.
Privately owned brokerages accounted for 128 transactions from 105 unique buyers in 2017, up from 114 acquisitions from 87 separate buyers in 2016—a record both for number of deals and unique buyers.
Partner Daniel P. Menzer was cited in the report saying that there are still plenty of interested sellers, and suggesting that they should take advantage of strong pricing before the market changes. And since trying to sell an agency internally can be challenging, with third parties being willing to pay much more than internal buyers, the likelihood is that the buyer will be a third party. Buyers, for their part, should be wary of overpaying, even if there are plenty of investors and lenders willing to fund PE/hybrid buyers.
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