The pace in the first six months of 2022 is 13% higher than the previous first-half five-year average, a period considered to be the most active M&A market in history. Following the typical first-quarter lull, volume in the second quarter of 2022 increased by 20% to become the fourth-most-active quarter of all time.
Growth is driven by related businesses
"One of the drivers is the expanded appetite of the most active buyers to look at businesses adjacent to the agency/brokerage business," said Steve Germundson, a partner at OPTIS Partners, an insurance-focused investment banking and financial consulting firm. "Life/financial services, actuarial and human resources consulting, technology, and other business related to insurance distribution accounted for 53 of the 427 announced deals."
According to OPTIS managing partner Timothy J. Cunningham, the number of deals done in the traditional agency/brokerage segment was nearly flat at a 1.5 percent increase.
"There simply aren't as many sellers as there used to be," he explained. "However, buyers still have a lot of capital to deploy, and they're finding ways to fill other gaps in their businesses with firms in this expanded space."
The report discusses four different types of sellers and buyers.
OPTIS reports have covered three types of sellers: those in the United States and Canada who primarily sell property and casualty insurance, those who sell both P&C and employee benefits, and those who only sell employee benefits. Because buyers' acquisition targets have expanded, OPTIS will include all other sellers-life/financial services, consulting, and other businesses associated with insurance distribution-for the first time in 2022.
Buyers are divided into four categories, according to the report: private equity-backed/hybrid brokers, privately held brokers, publicly held brokers, and all others.
Buyers from PCF, Acrisure, and Hub
The ten most active buyers accounted for 55% of all deals announced in 2022, with 72 buyers accounting for the remaining 45%. (43 buyers made only one acquisition).
With 48 deals completed in 2022, PCF has taken the lead among buyers for the first time. This represents a 70% increase over the same period in 2022. Acrisure, with 43, and Hub, with 35, followed, both with 40 percent increases over the previous year.
Inszone saw a nearly seven-fold increase in deal count, Patriot Growth saw a 16-fold increase, and Keystone Agency Partners saw a ten-fold increase (both tripled in count). Some active buyers reduced their activity, including AssuredPartners (down 68 percent), World Insurance (down 36 percent), Hilb (down 22 percent), and BroadStreet (down 16 percent) (down 16 percent ).
High Street Partners (20) and Relationship Capital (20) were also among the top buyers (16 deals).
Private equity-backed/hybrid buyers maintained their dominance in the buying spree, accounting for 76 percent of all transactions in the first half of the year, while private-party transactions accounted for 15 percent.
P&C Agencies Dominate Sellers
Traditional retail insurance distribution accounted for 83 percent of the businesses sold. Year to date in 2022, P&C sellers accounted for 253 transactions (59 percent of total), benefits agencies sales totaled 53 (12 percent), and there were 48 sales of P&C/benefits agencies (11 percent ). 73 sales were accounted for by all other sellers (17 percent ).
"So far in 2022, deal totals and buyer conversations indicate that the second half of the year should be active. The final figure may not be as high as 2021, but it may be close "Germundson explained.
The complete report is available at https://optisins.com/wp/2022/07/h1-2022-ma-report/.
S&P Global Market Intelligence ranked OPTIS Partners as one of the top six most active agent-broker M&A advisory firms from 2014 to 2021.
OPTIS Partners (www.optisins.com), based in Chicago, specializes in merger and acquisition representation for buyers and sellers, including due-diligence reviews. It offers fair market value appraisals, financial performance reviews, including trend analysis and internal controls, and ownership transition and perpetuity planning.