Insurance brokerage M&A activity dropped nearly 17%, but was still above average in 2023
While deal volume dropped year-on-year, MarshBerry still expects 2023 to see the third-highest transaction volume on record.
During 2023, insurance brokerage mergers and acquisitions declined by nearly 17%, according to Marsh, Berry & Co., LLC, which reported market movements are pointing to a positive year ahead for M&A activity.
The overall decline in 2023 is dramatic on its face, but MarshBerry noted that 2021 and 2022 both saw record levels of M&A activity. There were 1,066 transactions announced in 2021, while 2022 saw 903 deals announced.
As it is, the 751 deals announced in 2023 will mark the third-highest number of transactions in the industry’s history.
During the past year, 10 companies accounted for 43% of the announced deal. The top four most active buyers accounted for more than 21% of the 751 total transactions announced, according to MarshBerry.
Although overall transaction volume tumbled from record highs, valuations continued an upward trajectory. During 2023, the total purchase price potential for all brokerages was 7.8% higher compared with the year-end 2022.
Will 2025 mirror record-setting years?
During the final quarter of 2023, economic conditions began flashing the potential for insurance M&A tailwinds, MarshBerry reported. Interest rate hikes successfully cooled inflation, and the Federal Reserve responded by halting its rate increases.
According to MarshBerry, interest rate cuts could be coming in the year ahead, which in turn could drive up buyer-side demand.
Further, the potential sunsetting of the Tax Cuts and Jobs Act of 2017 might prompt more sellers to hit the market in 2024. The tax cuts expire in 2025 and income tax rate increases could be seen in 2026.
MarshBerry does not anticipate tax cuts for “middle America” to go away and expects politicians to make deals keeping those rates in place. Other tax increases could be seen as a result, and the richest 1% of Americans, business owners and capital gains could be targeted. With potential tax increases looming, more brokerage owners could be motivated to sell.
These potential motivating forces for buyers and sellers could result in the end of 2024 and early 2025 seeing a robust level of M&A activity, MarshBerry reported.
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