Specialty Distribution Markets: Mid-Year Update of M&A Activity and Valuations

Video Transcription

Hello, my name is George Bucur. I’m managing director and co-head of MarshBerry’s specialty practice. Serving specialty firms such as MGA’s (managing general agent), MGU’s (managing general underwriter), wholesale brokers, and program managers, we’re here to present to you a mid-year update on M&A (mergers and acquisitions) activity and the related valuations. Valuations for specialty firms have inflected above that of the retail brokerage counterparts. Why is this meaningful? Historically, specialty firms have been valued at a discount. This reflects the value being perceived by the overall buyer community as well as the breadth of the buyer community that is interested in investing into specialty firms. Specifically, we saw specialty firms at an all-in valuation perspective increase by nearly 25 percent from 2020 to 2021. This is compared to their retail counterparts which increased to by around 10 percent. Now, almost paradoxically, if we look at the overall transaction activity, we’ve actually seen a decrease of specialty distributor transactions in 2022 compared to 2021 through this period of time. With 44 transactions in 2022 compared to 77 transactions in 2021, it’s not so much of a challenge from the buy-side because demand remains overall very robust, but from a sell side in fewer sellers coming to the market this year. That being said, MarshBerry expects an uptick in transactions in the second half of 2022 just based alone on our overall pipeline, as well as what we’re hearing in the marketplace. So, generally speaking, interest remains high for specialty firms. Again, going back to the concept of the value that they bring to the overall distribution sector. If you have questions about how the overall M&A marketplace and valuations are impacting your organization, we encourage you to reach out. Until next time, be well.