Industry the May 2024 issue

Easing Debt Markets Produce Robust Conversations on M&A

As the Federal Reserve touts potential interest rate cuts in 2024, will buyers in the insurance brokerage space ramp up activity?
By Phil Trem Posted on April 30, 2024

Even so, for buyers and sellers in the insurance brokerage mergers and acquisitions space, conversations this year have already started with renewed vigor.

Many buyers have been anxiously awaiting clarity on interest rates. Now that the debt markets’ future is somewhat clearer, and with the Fed seemingly still on course to cut rates in 2024, some buyers are mapping out plans to ramp up acquisition strategies, with the potential to acquire at a higher volume this year. While increased interest in M&A doesn’t necessarily translate into rising valuations, it points to a positive outlook for activity and increased demand for quality sellers.

Compounding the impact of this shift on the M&A market is the potential for tax changes in 2025 through a second-term tax plan from President Joe Biden and/or the pending expiration of the Tax Cuts and Jobs Act of 2017. A market in which buyers and sellers are both highly motivated is a formula for activity to possibly reach levels reminiscent of 2021-2022.

As insurance brokerage owners contemplate their future and consider how to continue to scale their businesses, this year may be an inflection point. After all, much of their organic growth success over the past two years has come from the hard market environment and increased premiums. As rates begin to ease, firms that demonstrate good leadership, expertise, and value can remain competitive and attractive to potential partners.

M&A Market Update

As of March 31, 2024, 114 insurance brokerage M&A transactions have been announced this year in the United States.

Private-capital backed buyers accounted for 85 of the 114 transactions (74.6%) through March. This represents a substantial increase since 2019, when private-capital backed buyers accounted for 59.3% of all transactions. Independent agencies accounted for 16 deals so far in 2024, representing 14% of the market, a slight decrease from 2023, when independent agency acquisitions represented 15.6% of the market. Bank buyers have recorded only one transaction in 2024, after acquisitions declined from 18 transactions in 2022 to nine in 2023—an all-time low.

Deal activity from the top 10 buyers accounted for 62.3% of all announced transactions through March, with the top three (BroadStreet Partners, Hub International, and Integrity Marketing Group) accounting for 29.8% of the 114 total transactions. For comparison, the top 10 buyers in all of 2023 accounted for 41.9% of total transactions, with the top three representing 16.2%.

Notable Transactions

  • March 7: Hub International acquired the assets of Bolds Risk & Insurance Services, an independent firm based in Larkspur, California. Bolds Risk provides commercial and personal insurance as well as risk management services to clients in the region. The team will join Hub Central and Northern California in the Larkspur office. Bolds Risk will now operate under the name Bolds Risk, a Hub International company.
  • March 14: BharCap Partners, a private investment firm based in Greenwich, Connecticut, has completed the acquisition of Insurvia, an insurance services holding company specializing in non-standard auto insurance and related products. Insurvia distributes policies for over 50 insurance companies, focusing on underserved markets through franchise and company-owned models. Gemspring Capital and management were the selling shareholders.
  • March 21: Risk Strategies has acquired Hugh Wood Inc. (U.S.) and Hugh Wood Canada, the U.S. and Canadian branches of H.W. International (HWI). Hugh Wood Inc., based in New York City, offers commercial and personal insurance solutions, specializing in real estate, marine, and fine art sectors. Hugh Wood Canada, located in Toronto, focuses on architect and engineering professionals, personal lines, real estate, and fine art. This acquisition concludes HWI’s strategic review of its North American operations and is Risk Strategies’ first acquisition of a Canadian insurance brokerage.
Phil Trem President of Financial Advisory, MarshBerry Read More

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