2023 has been a year of conflicting economic projections, keeping consumers and investors on their toes. As overall inflation numbers have eased – the Federal Reserve’s interest rate-hiking campaign seems to have peaked, holding rates steady for the past two meetings. For buyers and sellers in the insurance brokerage merger & acquisition (M&A) world, this should be a positive sign of things to come.
Over the past year, buyers have seen their share of challenges in the availability and higher cost of capital. For sellers, they have seen more scrutiny and due diligence by buyers who have become more selective in their targets.
The fourth quarter of the year has historically been the most active. With 89 announced transactions added in October to the 2023 total, and lots of rumors about big buyers seeking big deals, perhaps history will repeat itself.
M&A Market Update
Through October 31, 2023, there have been 543 announced insurance brokerage M&A transactions in the U.S. However, these numbers can be deceiving as some buyers seem to be completing transactions but delaying announcements, or foregoing announcing altogether. Only time will tell how comparable this year’s deal count will be to prior periods.
Private capital-backed buyers account for 385 of the 543 transactions (70.9%) through October. Total deals by these buyers increased at a Compound Annual Growth Rate (CAGR) of 11.1% since 2018, with a marked increase after the onset of the pandemic.
Deals involving specialty distributors as targets account for 114 transactions (or 21%) of the total 543 deals in 2023. Specialty firm deals increased by a CAGR of 22% from 2018 through 2022, a trend that is anticipated to continue as traditional retail brokers expand into the wholesale and delegated authority space.
Through October, independent agencies as buyers accounted for 82 transactions (or 15.1%) – down from 17.2% in 2022. Bank and thrift as buyers accounted for nine announced deals (or 1.7%) – down from 2% in 2022.
Deal activity from the marketplace’s most active acquirers has remained strong in 2023. Ten buyers accounted for 47.5% of all announced transactions, while the top four (BroadStreet Partners Inc., Inszone Insurance Services, Inc., Hub International Limited, and Accession Risk Management Group) account for 25.2% of the 543 total transactions.
Notable transactions:
- October 24: Arthur J. Gallagher (NYSE: AJG) announced that it acquired the insurance operations of Cadence Bank (Cadence Insurance). Cadence Insurance is the second largest bank-owned insurance broker in the U.S. and has risen to be one of the Top 50 brokers of U.S. business. Based in Baton Rouge, LA, Cadence provides services in the commercial property, construction, oil and gas, manufacturing, professional services, health care, and religious/non-profit sectors across more than thirty offices in the south and southeast. This deal marks AJG’s 15th announced transaction in Louisiana and 26th announced transaction of 2023. MarshBerry served as an advisor to Cadence Insurance on this transaction.
- November 2: Hub International Limited announced that it acquired Columbus, OH-based insurance agency, Overmyer Hall Associates. Overmyer Hall, one of the largest Property & Casualty insurance agencies in the state and specializing in the construction and real estate industries, will now be referred to as Overmyer Hall Associates, a Hub International Company. This deal marks Hub’s fourth announced transaction in Ohio and 32nd announced transaction of 2023. MarshBerry served as an advisor to Overmyer Hall on this transaction.
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