There were 165 announced merger and acquisition transactions of insurance agencies in the US and Canada in the first six months of the year, according to a new survey from OPTIS Partners.
That’s a 40% jump over the year-earlier period, which boasted 118 transactions, and the most active first half since the advisory firm began tracking M&A activity since 2008. It’s also the second most-active six-month period OPTIS has recorded, and may have something to do with changing demographics in the insurance agency sector.
At least, that’s what OPTIS managing director Timothy Cunningham believes.
“It looks like the first half of 2014 is the start of a prolonged active period for agent-broker M&A transactions,” Cunningham said of the report. “The agency-brokerage business is awash with Baby Boomer principals.”
In fact, Cunningham noted that 30% of all equity in the system is owned by these aging principals and that the industry in general has not appropriately addressed the issue of perpetuation/succession planning to ensure those assets continue on to a next generation of insurance professionals.
As such, OPTIS anticipates that selling to a larger organization will remain the most attractive—and in some cases, the only—option for independent agency owners looking to retire.
“We predict there will be robust M&A activity going forward as more agencies owned by retiring Baby Boomers continue to go to market,” Cunningham said. “Without a sound perpetuation plan in place, the only option for many aging principals will be to sell to a third party—often PE-backed and public brokers—to capitalize the value of their agency.”
The report surveyed agency owners in the US and Canada, covering property/casualty agencies, employee benefits agencies and agencies selling both P/C and employee benefits.
The most active buyers continue to be private-equity backed firms, accounting for 67 agency purchases, followed by privately owned brokers (54 deals), publicly held brokers (27), banks (9) and insurance companies/others (8).
In terms of individual buyers, Hub International, Gallagher and AssuredPartners and Arthur J. Gallagher accounted for the highest number of deals in the space.
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