Largest Decline Ever in Agency M&A Through First Three Quarters: OPTIS

Investment banking and financial firm OPTIS Partners said the count of agency mergers and acquisitions through the first three quarters of 2023 saw the largest declined ever recorded.

There were 534 announced M&A deals of U.S. and Canada property/casualty insurance agencies through Sept. 30 – down 27% from 720 in 2022, according to the firm’s M&A database. There were 168 transactions in the third quarter, 34% lower than the same period in 2022.

Steve Germundson, partner of OPTIS Partners, said the slowdown was due to “rising costs of capital, the increase in leverage, and a smaller supply of business owners.”

Broadstreet Partners and Hub International led all buyers with 43 and 37 transactions year-to-date, respectively. Other top buyers were Inszone Insurance Services and Leavitt Group at 27 deals apiece, World Insurance Associates at 24, and Arthur J. Gallagher at 25.

No other buyer reported more than 25 transactions in 2023.

Perennial deal-count leaders Acrisure and PCF Insurance slowed deal activity dramatically. Combined they did 81% fewer transactions than in 2022.

Though the “M&A bubble has deflated, according to OPTIS, partner Dan Menzer said “there are still a lot of deals being done and a number of buyers likely not strapped with debt are upping their deal flow.”

We continue to see valuations holding, especially for attractive sellers,” said Tim Cunningham, managing partner. “The economic change of rising interest rates and a reduction in the supply of sellers has fundamentally changed the value proposition that the insurance distribution business represents. It has not reduced the demand from a still robust group of buyers. We expect the valuation environment to hold rather steady, though we could see that soften slightly for less attractive firms over the coming quarters.”

The private equity-backed/hybrid group of buyers did 67% of all transactions so far in 2023. Property/casualty-only agencies accounted for 62% of the total transactions through the first three quarters of 2023.