Broker, agency M&A activity down in first half of 2013

There were 122 reported mergers and acquisitions of insurance agencies in Canada and the United States in the first half of the year, down slightly from 133 last year, according to the semi-annual survey from OPTIS Partners.

“It was a period of relative calm after the perfect storm of getting deals done before the capital gains tax-hike,” noted Timothy J. Cunningham, managing director of OPTIS, an investment banking and financial consulting firm specializing in the insurance industry.

“This year’s numbers are inflated somewhat because many of the deals reported in January and some in February probably closed in 2012,” he added.

In the first quarter of the year, there were 76 transactions, but only 46 in Q2, according to OPTIS.

Privately-owned brokers were the biggest buyers with 45 acquisitions, up from 40 in the first half of 2012. Private-equity-backed brokers made 40 acquisitions, the same number as last year, while publicly-owned brokers saw their deal count fall from 30 to 18. Banks made 14 acquisitions, up from 10.

Hub International alone accounted for 14 deals in the first half of the year,  followed Arthur J. Gallagher with nine deals, and Digital insurance with seven.

For sellers, sales of property-and-casualty-focused agencies stood at 46. There were 30 deals for agencies selling both P&C and employee benefits, 36 sales of employee benefits-only agencies, and 10 other transactions, primarily MGAs being sold, according to OPTIS.

“We don’t expect to see a comparable level of activity for the remainder of 2013 as we saw in 2012, but we also strongly believe that over the long-term, M&A activity will continue to grow,” Cunningham said.

“There are plenty of buyers with readily available funds in the marketplace today. Buyers need the growth acquisitions provide, and the demand will continue to keep valuations attractive to sellers.”