Merger and aquisition activity is swirling around insurance agencies like never before through the first half of 2014, according to a report released Tuesday by OPTIS Partners, a financial services firm focused on the insurance-distribution industry.
In fact, the 165 deals announced so far this year rank as the second-most active six month period that OPTIS has ever recorded, with the agency M&A market 40% ahead of 2013 through the same time period.
And we're just getting started.
“We predict there will be robust M&A activity going forward as more agencies owned by retiring Baby Boomers continue to go to market,” says Timothy J. Cunningham, OPTIS managing director, in a statement annoucing the report.
That's right, owners are retiring and it is time for the next generation to move up in the industry.
According to OPTIS, private equity-backed firms have been the most active buyers in the space so far this year, accounting for 67 total agency purchases. Privately-owned brokers accounted for another 54 deals, followed by publicy-head brokers with 27 deals, banks with nine deals and insurance companies/other with eight deals.
“It looks like the first half of 2014 is the start of a prolonged active period for agent-broker M&A transactions,” Cunningham says. “The agency-brokerage business is awash with Baby-Boomer principals. It's estimated that more than 30% of all the equity in the system is owned by them. The industry has not adequately addressed perpetuation/succession planning. Without a sound perpetuation plan in place, the only option for many of aging principals will be to sell to a third party—often PE-backed and public brokers—to capitalize the value of their agency.”
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