M&A activity in agent, broker space reached record high in 2012: report

Merger and acquisition activity among insurance agencies reached a record high in 2012, bouncing back after a few years of low activity, notes a new report.

Last year, there were 291 reported transactions in the United States and Canada, according to an annual survey from OPTIS, an investment banking and financial consulting firm specializing in the insurance industry.

“Buyers were anxious to acquire and sellers equally anxious to complete their deals before capital gains tax rates went up in 2013,” noted Timothy J. Cunningham, managing director of OPTIS.

The previous record was 284 in 2008; 2007 and 2011 tied for third with 279 deals. Last year was the highest number since 2000, and followed the usual quarterly trend, with activity high in Q1, quieter in mid-year and very active in Q4, the report notes.

According to OPTIS, privately-owned agencies were the biggest buyers, making 93 acquisitions, although that declined from 101 in 2011.

“The decline is perhaps due to greater competition for deals from publicly owned brokers and private equity firms, which together accounted for 53 percent of the deals compared to 45 percent in 2011,” Cunningham said.

Banks were also active buyers, purchasing 24  agencies in 2012.

Among the more active buyers was Alberta’s Western Financial Group, which had five announced deals last year, and seven in 2011. Gallagher, Brown & Brown and Hub International were also major buyers last year.

Cunningham said he expects M&A activity to remain strong throughout 2013, especially as many principals of companies in the agent-broker space are part of the aging “boomer” population.