M&A Market Update August 2022
The Latest Deals and Insights
Who’s buying? Who’s selling? And why should you care? Phil Trem, MarshBerry’s President of Financial Advisory, highlights the current M&A market and provides a look at transactions in July 2022.
M&A Market Continues to Thrive but Questions on Valuation Continue to Linger
The market continues to see fluctuations in both the U.S. and global economies. On a domestic level, there have now been two straight quarters of decline in the GDP (technically a recession), rising inflation, rising interest rates to combat inflation, and the federal government’s sweeping economic legislation under the Inflation Reduction Act of 2022.
All of this continues to create tumult in the stock markets, and concerns about the economic challenges the market is currently facing.
Questions surround whether the short–term economic outlook and higher interest rates will impact the insurance distribution industry merger & acquisition (M&A) activity.
The broader outlook still looks very favorable. Buyers continue to have a large acquisition appetite and potential sellers are looking for partnerships that help them further their business models. MarshBerry continues to closely watch the interest rate environment to understand what will happen with demand if the cost of capital continues to rise.
The good news on this front is that many of the buyers raised a significant amount of debt over the last nine months and have enough dry powder to continue acquiring into next year — and for some into the summer 2023. At some point, buyers will need to pull down additional capital from the debt markets and the cost of that borrowing will be greater than what we have grown accustomed to.
Valuations are expected to continue to hold firm at the high watermark levels seen in recent months and years.
The waters get a bit murkier as we look to mid to late 2023. It will be important to keep a keen eye on inflation and interest rate levels to see how big of an impact this might have on the brokerage industry.
2022 Acquisition Detail (YTD 7/31/2022)
Who’s Buying:
Insurance Broker — Independent: 23
Insurance Broker — Public: 18
Insurance Broker — Private Capital Backed: 194
Insurance Company and Other: 22
Bank and Thrift: 6
What’s Being Bought:
Full Service: 75
P&C: 135
Employee Benefits: 53
Retail vs. Specialty:
Retail: 206
Wholesale: 29
MGA: 28
Market Update
As of July 31, 2022, there have been 263 announced M&A transactions in the U.S. The current volume of deal announcements represents a 25% decrease compared to this time last year. However, there have been consistent increases in monthly announcements since March of this year. Over the last three years there has been a strong increase in deal activity as fourth quarter (and year end) approaches, so the 2022 deal count is anticipated to close the year out strong.
Private Capital backed buyers accounted for 194 of the 263 transactions (73.8%) through July, remaining atop the various buyer classes. As previously mentioned, this trend is expected to remain consistent throughout the rest of 2022 as dry powder continues to be deployed. Public brokers have remained consistent with last year in terms of total deal count, making up 6.8% of total announced transactions.
Strong deal activity from the marketplace’s most active acquirers has remained constant through July. Ten buyers accounted for 54.9% of all announced transactions observed, while the top three (Hub International Limited, Acrisure, LLC, and BroadStreet Partners, Inc.) account for 22.8% of the 263 total transactions.
to month should an acquirer notify MarshBerry or the public of a prior acquisition. 2022 statistics are preliminary and may change in future
publications. Please feel free to send any announcements to M&A@MarshBerry.com. Source: S&P Global Market Intelligence, http://www.
insurancejournal.com, http://www.businessinsurance.com/, and other publicly available sources.
Deal Spotlight:
Patriot Growth Insurance Services Acquires BMT Insurance Advisors
June 30, 2022
Patriot Growth Insurance Services, LLC (Patriot) announced its acquisition of BMT Insurance Advisors (BMT).
Patriot, a private equity–backed, retail brokerage aggregator, is a growth–focused national insurance services firm that partners with employee benefits and P&C agencies across the U.S.
Patriot delivers key administrative resource and strategic support that allows agency partners to operate autonomously, helping to preserve local market brand and relationships. In 2022, Patriot was ranked as the 35th largest privately held broker in the U.S. by Business Insurance.
Philadelphia, PA–based BMT, previously a business division of WSFS Financial, is an insurance brokerage and risk management consulting firm that provides custom insurance solutions for personal and commercial lines, with specialization in educational institutions, small businesses, nonprofits, and social service organizations.
“When we partner with a new agency, we always look for commonalities in philosophies, beliefs, and values so we know it is a good fit within the Patriot community. BMT Insurance Advisors checked all the boxes,” said Matt Gardner, Chairman and CEO of Patriot.
MarshBerry Advises ESP Specialty Insurance Brokerage through Acquisition
July 13, 2022
MarshBerry’s client ESP Specialty Insurance Brokerage (ESP) was acquired by Specialty Program Group LLC (SPG).
ESP is a national insurance broker and program administrator, offering niche insurance solutions to the sports, leisure, recreation, hospitality, and entertainment industries. In 2021, ESP covered over 850K youth participants, had insured limits of over $1.5B across special events of all types, and was the top broker for youth tackle football leagues. ESP’s other unique client types include bowling centers, escape rooms, miniature golf, driving ranges, laser tag, batting cages, axe throwing, trade shows, and concerts.
Along with staple general liability and property coverage, ESP offers their clients other unique coverage such as liquor liability insurance, event cancellation insurance, weather insurance, and prize indemnity.
ESP’s specialized client base, unique product offerings and hyper focus on customer service including online servicing capabilities was what attracted SPG and ultimately led to the acquisition. SPG, a wholly owned subsidiary of HUB International Limited, was established to acquire and scale best–in–class insurance underwriting facilities and specialty businesses.
In the press release announcing the deal, SPG President & CEO Christopher Treanor stated: “They’re a nice complement to our portfolio of specialty companies and fit with our model of acquiring companies with niche expertise and a focus on customer service.”
MarshBerry, as a leader in sell side advisory services for multiple types of service businesses within the overall insurance ecosystem, is proud to have represented ESP in this transaction. MarshBerry is uniquely positioned to represent firms such as ESP given our deep knowledge base of both the MGA and retail broker distribution models. ESP is a great example of how MarshBerry drives premium valuations by leveraging our broad industry knowledge and experience.