Employee benefit brokers last year saw a 90% increase in mergers and acquisitions compared to 2016, according to the latest findings from OPTIS Partners.
Timothy Cunningham, managing director of OPTIS, says these sales were fueled by acquisitions by companies such as Alera, Acrisure and several others.
More than 174 transactions occurred within the employee benefit agency market, accounting for 28.8% of total insurance industry mergers and acquisitions that took place over the course of 2017.
The top five overall buyers were Acrisure, with 92 acquisitions; HUB International, with 49 acquisitions; Broadstreet Partners, with 32 acquisitions; and Gallagher, with 30 acquisitions. All were in private equity and hybrid categories, except for publicly owned Gallagher.
Privately owned brokerages completed 128 transactions from 105 unique buyers in 2017, up from 114 acquisitions from 87 separate buyers
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Agencies selling both P&C and employee benefits coverages were sold in 86 deals last year, while 43 sales in the “other” category were made. This includes managing general agents and third-party administrators.
Key takeaways
Daniel Menzer, partner at OPTIS, says there are six takeaways that can be made from recent deals:
1. The inventory of interested sellers remains high.
2. It’s hard to perpetuate agencies internally. Third parties are willing to pay much more than internal buyers. Few agency owners will leave that much money on the table.
3. A strong economy, a stable insurance market and easy access to relatively inexpensive capital for buyers all spurred activity.
4. There are plenty of investors and lenders willing to fund private equity and hybrid buyers.
5. If you are a buyer, pay attention to cash flow and be careful not to overpay.
6. If you are a seller, identify the best cultural and operational fit. Take advantage of strong pricing before things change.
Cunningham says the actual number of sales was greater than the number reported, as many buyers and sellers do not report transactions, and some acquirers do not report small transactions.
“The OPTIS database, however, tracks a consistent pool of the most active acquirers, including other announced deals, and is, therefore, a reasonable accurate indication of deal activity in the sector,” he says.
