Brokerage Ops the May 2012 issue

The First Movement Concludes

Anticipation builds.
By Dan Lekan

Throughout the first three months of the year, independent agencies kept the momentum alive with 28 deals, nine of which were completed by private equity-backed agencies. Other buyers and public brokerages finished with 15 and 11 transactions respectively. Banks must still be in rehearsal as they have been practically non-existent this year. Only one bank has completed a transaction thus far.

Buyers have continued to focus on retail operations, which comprised 87.5% of transaction volume. Retail targets were fairly evenly split between p-c, employee benefits, and full-service agencies at 37%, 33% and 31%, respectively. Geographically, California, Texas and Illinois had the most activity.

Arthur J. Gallagher was the big player in the first movement. This quarter they announced seven deals in the U.S. and one in Canada. Gallagher appears bullish on employee benefits since six of its transactions have been benefits-only agencies. Assured Partners continued its aggressive strategy by announcing four deals in 2012. The new private equity-backed agency has already reached annual revenues of $170 million in less than a year. Only five other entities closed at least two deals thus far, causing many to wonder who will follow Gallagher’s lead.

The current trend of mega blockbuster announcements for wholesale firms has continued with AmWINS Group’s declaration that a majority stake is available for sale in an effort to recapitalize. The private equity team behind the world’s largest wholesaler (in premiums) is hoping to receive a 13x EBITDA multiple for its investment. This could be possible given the recent multiples doled out for such wholesalers as Arrowhead and Crump.me

The first quarter may have ended with fewer deals closed than in the first three months of 2011, but the fundamentals and motivations of both buyers and sellers remain intact. Valuations are increasing, and the backlog of deals is rapidly reaching a tipping point. The pace of deal closings will continue to increase at a more frenetic pace as buyers begin to finalize transactions with the gusto and excitement felt by both the orchestra and audience. The second movement is now underway.  

International Action

On the international scene, Hub and Arthur J. Gallagher were both busy in Canada. Hub acquired a p-c firm out of Ontario, and Gallagher closed on a benefits-only agency in Calgary, its first in Canada. HSBC and Heng Seng Bank announced their intent to sell various insurance units to ING and QBE for $444 million and $784 million, respectively.

More in Brokerage Ops

Data Dials up Opportunity for Brokers
Brokerage Ops Data Dials up Opportunity for Brokers
Predictive models, sensors and claims insights promote risk prevention and speed...
Sponsored By The Hartford
Brokerage Ops AI Insights
Q&A with Scott Robertson, Managing Partner, KPISoft
Taking  the Robot  out of  the Human
Brokerage Ops Taking the Robot out of the Human
Automation may take over some back-office jobs, but it also presents opportuniti...
Sunny Skies Ahead
Brokerage Ops Sunny Skies Ahead
The next phase of insurtech will bring data-based predictions. But just like the...
The Human Side of Digital Transformation
Brokerage Ops The Human Side of Digital Transformation
Behaviorists can teach us about leveraging technology.
Talent Development Strengthens Bottom Line
Brokerage Ops Talent Development Strengthens Bottom Line
Council members are developing staff to grow top leaders and...