European M&A activity reached new highs in Q1 – Marshberry

Which country continues to lead in terms of transactions?

European M&A activity reached new highs in Q1 – Marshberry

Insurance News

By Kenneth Araullo

The previous year witnessed unprecedented mergers and acquisitions (M&A) activity in the European insurance distribution sector, reaching new highs – and this trend shows no signs of abating in 2024, as the sector continues to consolidate at a remarkable pace.

According to insights from Marshberry, the potential for further consolidation remains strong, driven by both national consolidators and international platforms seeking entry into new markets.

The European insurance brokerage market, previously fragmented, is consolidating rapidly. This shift is supported by broader positive signs in the European economy, such as decelerating inflation, stable interest rates, and robust financial markets, which collectively foster optimism for continued strong deal-making in 2024.

In the first quarter of 2024, the inflation rate in the 20-nation eurozone fell to a four-month low of 2.4% in March. In April, the European Central Bank (ECB) held interest rates steady at 4% for the fifth consecutive meeting, with indications of a potential rate cut looming on the horizon.

Brokerage activity remains strong

The insurance brokerage sector remains a hotspot for M&A activity in Europe, attracting significant interest from private capital investors. These firms are characterized by their lightweight capital requirements, high profit margins, strong client retention, and a history of stable returns despite market fluctuations.

Current valuations of insurance brokerage firms remain high, with a clear divide emerging between firms demonstrating strong management and organic growth and those yet to realise their full potential.

Higher insurance premiums in 2024, a result of last year’s inflation and increased risk premiums by carriers, are boosting financial results for insurance brokers. With increased competition among buyers, including strategic and private equity firms, for available acquisition targets, the dynamics of supply and demand are expected to keep driving deal prices upward.

Marshberry has tracked 110 announced M&A transactions among European insurance brokers up to March 31, 2024. This count likely underestimates the actual activity, as many smaller broker deals are not publicly reported. Private equity firms backed approximately two-thirds of these transactions.

The UK continues to lead in transaction volume across Europe, though the size of deals there is decreasing. This could potentially lead to a stabilization or decrease in deal prices. Conversely, consolidation continues robustly in most continental European markets, with significant platform company purchases laying the groundwork for further consolidation.

Several key transactions underscore the ongoing growth and consolidation within the sector:

  • On January 8, Arthur J. Gallagher & Co entered the German market by acquiring Köberich Financial Lines, part of a broader strategy to expand throughout Europe
  • On January 10, Corsair Capital took a majority stake in MJM Holdings, a top Polish commercial line broker, facilitating further expansion in Eastern Europe
  • On March 4, two Belgian corporate insurance brokers, induver and clover, merged with support from Hg capital, illustrating the trend toward consolidation

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