2014 Deal Activity Close to Record

Deal count for the fourth quarter of 2014 was the second most active quarter on record with 91 announced transactions. The total deal count for 2014 (as of Jan. 12, 2015) was at 321 (U.S. based transactions). This was a 43 percent increase over the number of announced transactions in 2013 and only four deals shy of the all-time record of 325 set back in 2012, prior to the capital gains tax rate increase. For the fourth quarter of 2014, 29 deals closed in October, 27 deals closed in November, and December, historically one of the most active months for deal activity, had 35 deals announced.

In 2014, 46 percent of all acquired agencies were property/casualty (P/C) firms, 31 percent were multi-line agencies, and 23 percent were employee benefits firms.

The wholesale segment, with 63 announced deals in 2014, increased deal flow by 75 percent and comprised of just less than 20 percent of the total deal count.

Private-equity backed and independent agencies accounted for slightly more than 70 percent of all deal activity in 2014.

Public brokers increased deal count from 27 closed transactions in 2013 to 52 in 2014, and accounted for 16 percent of the total deal activity in 2014.

Insurance companies, banks and other buyers remained relatively flat compared to the prior year’s deal flow, and accounted for 13 percent of U.S transactions in 2014.

The top five buyers for the year represented 33 percent of all deal activity and the top 10 accounted for 44 percent.

After falling to second behind AssuredPartners Inc. in 2013, Arthur J. Gallagher & Co. (Gallagher) regained the top spot with 31 announced deals, nine coming in the fourth quarter. Gallagher’s acquisition appetite appeared to be fairly evenly spread between retail, wholesale, P/C, multi-line, and employee benefits firms. Ten of Gallagher’s transactions were employee benefit firms and seven were wholesale-related agencies. In addition to the 31 announced U.S transactions, Gallagher closed 12 international deals in China, Australia, New Zealand, Canada, Peru, and the U.K.

AssuredPartners Inc. was second on the deal count list with 25 acquisitions, which was an increase over the industry leading 20 deals they closed in 2013. Eight of these deals were completed in the fourth quarter.

Hub International Limited closed 21 U.S. transactions during 2014, and was also very active in Canada, where they acquired 10 agencies.

Acrisure LLC and Confie Segeros completed 16 and 13 deals during 2014, respectively. For the most part, Acrisure targeted agencies in the Northeast and Confie Segeros acquired non-standard auto agencies.

The top 10 buyers as measured by deal count were rounded out by USI (10), Marsh & McLennan (10), Digital Insurance Inc. (6), Risk Strategies Co. (5), National Financial Partners Corp. (5), CBIZ, (5), World Insurance Associates (5), and Edgewood Partners Insurance Center [EPIC] (5).

As you can see, the acquisition marketplace was very good in 2014. Private equity continued to flood the market, public brokers substantially increased activity, the wholesale market continued to gain momentum, and new buyers emerged as real players. There were 136 buyers this year, and approximately half of those buyers did their first deal in 2014. We believe that market conditions will continue to be healthy into the first half of 2015 and monthly deal counts should remain consistent with 2014 levels.

Securities offered through MarshBerry Capital Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122 (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.

Merger and Acquisition Activity
October to December 2014

Sources: SNL Financial, Insurance Journal, other publicly available sources and MarshBerry proprietary databases
Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only.