Canadian Underwriter

Canadian, U.S. insurance agency mergers and acquisitions in Q1 breaks record, OPTIS Partners’ report reveals

May 12, 2016   by Canadian Underwriter

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Insurance agency mergers and acquisitions in Canada and the United States hit an all-time high for the first quarter of the year, with 109 reported transactions in the first three months of 2016, according to OPTIS Partners’ M&A database.

M&A (Merger & acquisition) sign on businessman handThe data covers U.S. and Canadian agencies selling primarily property and casualty insurance, agencies selling both P&C and employee benefits, and those selling only employee benefits, OPTIS Partners said in a press release on Tuesday.

The pace slightly outstripped 107 deals reported in the first quarter of 2015. OPTIS reported a record 455 M&A transactions in 2015.

“M&A activity seems to have unstoppable momentum,” said Timothy J. Cunningham, managing director of Chicago-based OPTIS, an investment banking and financial consulting firm specializing in the insurance industry.

The OPTIS report breaks down buyers into five groups: private-equity backed brokers, privately held brokers, publicly held brokers, banks and all others. PE-backed buyers continued to lead the charge with 50 transactions, a 25% increase over the same period last year. Top buyers were Acrisure (13 transactions), AssuredPartners (11 transactions) and Hub International (eight transactions).

Privately-held brokers were the second largest group, completing 34 deals, down from 41 in Q1 2015, OPTIS said in the release. Publicly traded brokers completed 10 deals, down from 12 in Q1 2015. Bank acquisitions remained unchanged at seven. Transactions by all others numbered eight, up one.

Agency acquisitions continue to focus on P&C shops (63 announced transactions) and P&C/benefits brokers (21 deals). There were 10 employee benefits agency sales.

Several active buyers from prior years did not announce any transactions during the first quarter, including NFP, Integro, TowneBank, Eagle American Insurance and J. Smith Lanier. However, nearly 30 firms that announced a transaction in Q1 had not announced any prior deals, OPTIS said.

“The actual number of sales was undoubtedly greater than the 109 reported during the quarter since many buyers and sellers do not announce transactions,” said Daniel P. Menzer, CPA, partner with OPTIS. “However, because our database tracks a consistent pool of the most active acquirers, it’s a reasonably accurate barometer of activity.”

Focused exclusively on the insurance distribution marketplace, OPTIS offers M&A representation of buyers and sellers, including due diligence reviews. It provides appraisals of fair market value; financial performance review, including trend analysis and internal controls; and ownership transition and perpetuation planning.

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