M&A Market Update Vol III, Issue 2
The Latest Deals and Insights
Who’s buying? Who’s selling? And why should you care? MarshBerry highlights the current M&A market and provides a look at recent transaction activity.
Momentum Builds In the Insurance Distribution M&A Market After a Strong Q1 2024
Through the first quarter of 2024, there’s a feeling that momentum is starting to build towards an active year for buyers and sellers in the insurance brokerage space. Could this be a possible banner year for mergers and acquisitions (M&A)?
Buyers entered the year with optimism, following a strong end to 2023. Improved market conditions, without the need for the so-called “soft landing,” and the Fed’s continued support for interest rate cuts, has renewed buyers’ desire for acquiring EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Even with recent upticks in inflation (with the CPI rising 3.5% in March) members of the Fed continue to tout possible rate cuts “later this year.”1
First quarter numbers support the thesis that both supply and demand for insurance brokerages are escalating. As firms have gotten more comfortable with their cash positions, some have expressed their desire to acquire more in 2024 than they did in 2023. With the prospect of lower costs for debt capital, they are projecting a more aggressive approach to M&A.
For sellers, along with renewed interest from buyers, there are concerns around the impact of the Presidential election on capital gains taxes. President Biden recently released his second-term tax plan in which capital gains tax increases are a key component. In addition, the Tax Cuts and Jobs Act (TCJA) will expire at the end of 2025, at which point, tax rates would revert to 2017 levels.
The various uncertainties related to taxes are motivators for insurance brokerage owners who may be contemplating a partnership or sale of their business to accelerate their timelines. And a market in which buyers and sellers are both highly motivated — is a formula for activity to possibly reach levels reminiscent of 2021–2022.
M&A Market Update
As of April 30, 2024, there have been 197 announced insurance brokerage M&A transactions in the U.S. — a 43.8% increase in total deals compared to this time in 2023, which ended April with 137 announced transactions.
Private capital-backed buyers accounted for 142 of the 197 transactions (72.1%) through April. This represents a substantial increase since 2019 when private capital-backed buyers accounted for 59.3% of all transactions. Independent agencies accounted for 32 deals so far in 2024, representing 16.2% of the market, a slight increase from 2023 when independent agency acquisitions represented 15.6% of the market. Bank buyers have recorded only two transactions in 2024.
Deal activity from the top ten buyers accounted for 54.3% of all announced transactions through April, while the top three (BroadStreet Partners, Inszone Insurance Services and Integrity Marketing Group) accounted for 25.4% of the 197 total transactions.
Notable Transactions
April 3: Hub International Limited announced the acquisition of Lakeland, FL-based Sale Insurance Agency, Inc. Sale Insurance has been serving Central Florida for over 70 years as a family-owned boutique independent insurance agency, offering commercial insurance for businesses and high net worth personal insurance. Following the acquisition, Sale Insurance will operate as Sale Insurance, a Hub International Company.
April 11: Alera Group announced the acquisition of HealthSure, a Texas-based company founded in 1998 by Barry Couch. HealthSure specializes in risk consulting and insurance solutions for rural healthcare organizations. HealthSure has a commitment to community engagement and philanthropy, evident in their development of HealthConnect, a program aimed at empowering hospital executives to build relationships with their communities.
April 15: Higginbotham acquired Eagan Insurance of Metairie, Louisiana, establishing a partnership with a strong local reputation and extensive regional presence in Southern Louisiana and Gulf Coast Mississippi. Eagan Insurance, founded in 1954, is known for its integrity and stability, offering a range of insurance services including personal lines, commercial property and casualty, and employee benefits. With over 90 experienced team members, Eagan Insurance is committed to providing expert service and meeting clients’ evolving needs in today’s insurance landscape.
Investment banking services in the USA offered through MarshBerry Capital, LLC, Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, LLC, 28601 Chagrin Blvd, Suite 400, Woodmere, OH 44122 (440) 354-3230
Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only. Scorecard year-to-date totals may change from month to month should an acquirer notify MarshBerry or the public of a prior acquisition. 2024 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.