Deal Activity Still Booming
Deal count for the third quarter of 2015 continued its record breaking pace with 89 announced transactions. Although it was the slowest quarter in 2015 (107 in 1st quarter and 99 in 2nd quarter), it was the most active third quarter in the past 10 years. The total deal count for year-to-date 2015 (as of Sept. 30, 2015) was at 295 U.S. based transactions, which is a 28.3 percent increase over the number of announced transactions over the same time period in 2014. This is the highest deal count through the third quarter of the year in the past 10 years. For the third quarter of 2015, 34 deals closed in July, 33 in August and 22 in September.
For the first nine months of 2015, 56 percent of all acquired agencies were property/casualty (P/C) firms, 29 percent were multi-line agencies, and 15 percent were employee benefits firms. Specialty distributors made up 23 percent of the total deals year-to-date. This is an increase from 20 percent in 2014.
Private-equity backed and independent agencies completed 206 transactions, accounting for 69.8 percent of total deal activity in the first nine months of 2015. Deal count for public brokers, which accounted for 9.2 percent of the deal activity through nine months of 2015, declined from 39 closed transactions year-to-date 2014 to 27 year-to-date 2015. Insurance companies, banks and other buyers experienced a surge in deal activity from 32 closed transactions in 2014 to 62 in 2015, and accounted for the remaining 21 percent of total deals.
The top five buyers for the year represented 29 percent of total deal activity through quarter three of 2015 and the top 10 accounted for 46.7 percent. AssuredPartners Inc. led the pack with 25 announced transactions and continued its aggressive growth strategy by focusing on P/C and multi-line retail firms. AssuredPartners Inc. closed 15 transactions in the East, four in the Midwest and continued its expansion out West with six closed deals.
Hub International Limited (Hub) was second on the list with 24 acquisitions. Hub picked up the pace from the first two quarters closing 14 deals in the third quarter. Hub closed 12 acquisitions on the West coast, three in the Midwest and nine in the East.
Confie Seguros Insurance Services and Arthur J. Gallagher & Co. (Gallagher) were third and fourth with 13 and 12 announced transactions, respectively. This marked an increase in deal activity for Confie Seguros, mainly a non-standard auto specialist that completed 13 acquisitions during all of calendar year 2014. In addition to acquiring 10 P/C agencies, Confie Seguros acquired three program administrators, which include managing general agents and managing general underwriters. Arthur J. Gallagher & Co. completed 12 transactions that were evenly spread between retail, wholesale, P/C, multi-line and employee benefits firms.
Acrisure LLC was fifth completing 11 acquisitions with targets being split between P/C and multi-line agencies.
The top 10 buyers, as measured by deal count, were rounded out by NFP Corp. (10), Brown & Brown Insurance (eight), The Hilb Group (eight), Alliant Insurance Services Inc. (six) and Integro Insurance Brokers (six). Top 10 buyers that announced international acquisitions included: Hub, Gallagher, NFP and Integro.
Acquisition activity is on pace to break the record setting year in 2014, largely driven by the continued demands of private equity. Private equity backed brokers increased deal activity by 45 percent from the first nine months of 2014 to the first nine months of 2015. While public broker activity has simmered in comparison, independent brokers, banks and insurance companies have more than picked up the slack in their search for growth and talent.
Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Co. Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122 (440-354-3230). Except where indicated, the information provided is based on matters as they exist as of the date of preparation.
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. MarshBerry estimates that only 15 percent to 30 percent of all transactions are actually made public. Past performance is not necessarily indicative of future results.