Insurance M&A still down despite recent uptick
OPTIS Partners Q3 report indicates potential for future deal growth.
Insurance mergers and acquisitions were down 10% in the first three quarters of 2024, though deal making has increased in recent months.
Data compiled by OPTIS Partners showed 535 announced deals in the first three quarters of 2024, down from 594 deals during the same period in 2023. The three-quarter total is 13% below the previous five-year average.
However, deal count increased in the second and third quarters of 2024 after six consecutive quarters of decline. In Q3, 198 deals were announced in the United States and Canada, up 14% from 173 deals in Q2 and up 21% from 164 deals in Q1.
“While two quarters do not a trend make, we believe that we’re at or near the bottom of the deal-flow trough,” said Steve Germundson, a partner at OPTIS Partners, in a release.
Deal numbers declined in 2023 and the beginning of 2024 after peaking in 2021, when 1,108 deals were completed, and 2022, which saw 1,031 deals. However, current numbers are not outside of the longer-term norm. In the three years prior to the pandemic, the industry averaged about 600 deals each year.
“Some may call the deal flow today ‘the new normal’ though we’re more likely to call it the ‘old normal,’” said OPTIS Managing Partner Timothy Cunningham in a release. “Deal volume is still off from the peak, but it is also still above pre-2021 flow.”
Private equity-backed and hybrid brokers were the buyers in 73% of deals so far this year. Top buyer BroadStreet Partners has completed 68 deals, up 51% from the same period last year and twice its five-year average.
Other top buyers include Hub (39 deals), Inszone (38) and Patriot Growth (32). While Hub has dialed back on deal making — down 13% from 2023 — both Inszone and Patriot Growth have increased their deal counts. Patriot Growth has nearly doubled its transactions compared to last year.
Private-party transactions accounted for 17% of deals, and publicly held brokers and all others made up 10% of deals.
Most deals — 65% — were for property & casualty agencies. Other deals were for benefits agencies (14%) and P&C/benefits agencies (10%).
OPTIS Partners sees potential for increased M&A activity going forward as interest among sellers remains high.
“We continue to see a large number of potential sellers in the industry, both long-established agencies owned by baby boomers as well as those that started up in the last five to 10 years,” Germundson said. “That certain level of regeneration is an interesting dynamic, and often, those firms are showing real organic growth.”
A stabilizing economy might encourage more buyers to enter the market and could also lead to an increase in deal size.
“We see more significant changes in the buyer community to come,” Cunningham said. “On the heels of some large acquisitions in 2024, such as AON’s purchase of NFP and Marsh McLennan Agency’s announced acquisition of McGriff Insurance, we look for more large deals to be announced as the big firms chase growth.”
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