The first half of 2024 saw a notable decline in insurance agency mergers and acquisitions (M&A), with only 300 deals announced. This represents a 20% decrease from the 385 transactions recorded during the same period in 2023, based on OPTIS Partners’ M&A database. This count marks the lowest first-half total in four years and is 26% below the average for the previous five years. The trend of falling deal numbers has persisted for six consecutive quarters, indicating a significant shift in market activity.
Key Trends and Leading Firms
According to Steve Germundson, a partner at OPTIS Partners, the current level of deal-making is similar to that seen in 2019 and 2020. Some firms that were previously active have reduced their activity, while others have increased their pace. BroadStreet Partners led the first half of 2024 with 46 transactions, marking a 77% rise from the same period last year. Inszone and Hub followed with 27 and 26 deals, respectively. The top 13 buyers, primarily private equity-backed firms, accounted for 64% of all transactions.
Dynamics of Buyers and Sellers
In the first half of 2024, 62 distinct buyers were involved in insurance distribution-related M&A transactions. Of these, 41 completed fewer than five deals, and 26 firms made only one acquisition. Fourteen firms announced their first acquisition. Private equity-backed/hybrid brokers dominated the market, accounting for 71% of transactions, while privately held brokers made up 20%. Publicly held brokers and other buyers accounted for the remaining 9%.
Sellers were categorized into four groups: property and casualty (P&C) insurance agencies, agencies offering both P&C and employee benefits, employee benefits agencies, and other related businesses. P&C agencies accounted for 66% of the total with 198 transactions. Employee benefits agencies had 34 deals, while agencies offering both P&C and employee benefits accounted for 33 transactions. Other sellers, including life/financial services and consulting businesses, made up 12% of the total with 35 sales.
Future Outlook for M&A Activity
Despite the current downturn, the M&A market might soon stabilize. Germundson suggests that we could be returning to a “normal” level of deal-making akin to what was observed from 2017 to 2019. A robust number of independent agencies are still looking for external ownership solutions, driving ongoing interest from buyers. If inflation decreases and the Federal Reserve lowers interest rates by the end of the year, buyer activity could pick up. Additionally, several brokers are considering going public in 2024 or 2025, which could further influence the market landscape.
While the first half of 2024 has seen a significant decline in M&A activity within the P&C and benefits brokerage sectors, the market dynamics suggest a potential for stabilization and renewed growth. The continued interest from buyers and evolving market conditions indicate that the insurance M&A landscape will remain a critical area to monitor.