After years of contraction, the agency-brokerage mergers and acquisition market could be on the verge of a comeback. According to a recent Advisen study, the big global brokers in 2010 will be keen to acquire smaller rivals hurt by the contracting commercial property-casualty market.

Although the agency M&A market has seen its boom times, activity has slowed dramatically, with transactions down 40 percent from last year, according to Richard Schlicher of Gill and Roeser Holdings Inc., who is interviewed in this month's cover article on page 28. The lack of bank and private equity players, who played a significant role in fueling the M&A booms of previous years, plays a large part of this trend. In other words, agency M&A activity, like most other business deals, is a victim of a generally poor economy that had been contracting years before the big recession exploded late last year.

At the same time, IIABA's updated Best Practices study found that 2 years of a soft market and a poor economy have significantly deteriorated independent agencies' return to shareholders. A score of 20 translates into a shareholder return of 15 to 16 percent, which is about right for a well-run agency. Those with less than $5 million in revenue saw their scores drop from 25.6 to 14.4. For agencies with revenue of more than $5 million, the score dropped from 24.2 to 13.4. This deterioration could suggest that there are fewer attractive potential acquisitions in the M&A pool–or that more agencies have an incentive to put themselves on the market.