No 2012 Spillover
Buyers are looking to rebuild their pipelines depleted by heavy December activity.
The New Year lag is over. It’s time to get back to work. For those in the thick of closing an amazing 77 deals in December 2012, there was a collective sigh of relief and brief hiatus shortly after January 1. Most buyers focused on ensuring that integration of their numerous fourth-quarter acquisitions got off to a good start.
January rang the bell with only nine announced transactions. Prior to 2013, the lowest total deal count in January in the last nine years was 22 (in 2006). The pending fiscal cliff has had a major impact on January as most buyers depleted their pipelines in December and ensured that all sellers were able to capitalize on the lower federal capital gains rate of 15% in 2012. In prior years, there were always some deals that would get pushed into January because of capacity issues, but not in 2012.
In addition to a light January, organic growth rates nationwide have continued to improve. Total commission and fee organic growth rates in 2012 are averaging just shy of 5% nationally—the highest rate since 2006. This statistic may lead you to believe that buyers are or will slow down because they can hit growth expectations with more organic growth and less acquisition growth.
However, do not let the low volume of transactions in January or positive-trending organic growth dampen your thoughts on the potential of 2013’s merger and acquisition marketplace. Buyers are still incredibly active. There was a significant influx of new private equity into the marketplace in 2012, and publicly traded brokerages are generating free cash flow earmarked for acquisition in 2013.
There was a significant influx of new private equity into the marketplace in 2012, and publicly traded brokerages are generating free cash flow earmarked for acquisition in 2013.
Many quality firms are still not well positioned to internally perpetuate. It does not appear that valuations are decreasing, and sellers are beginning to get used to the “new normal” federal capital gains tax rate of 20%.
Buyers (and advisors) are working feverishly to replenish their pipelines of domestic opportunities, and the coming months will certainly see an increase in transactions as the seller’s market is well positioned to continue into 2013 and beyond.
International Deals
Hub International completed two notable transactions in Canada in January. Hub acquired a group home and auto insurance program book of business for members of Actra Fraternal Benefit Society (AFBS), a Toronto, Ontario-based firm. AFBS is a not-for-profit, federally incorporated carrier that provides services to members of the Association of Canadian Radio Artists (ACTRA) and the Writers Guild of Canada.
Hub also acquired Strata Benefits Consulting, a Winnipeg, Manitoba-based employee benefits brokerage firm. Strata will become part of Hub International Horizon (Hub Horizon).
Deal count metrics are inclusive of completed deals with U.S. targets only. Previous scorecard totals may change when we learn of new acquisitions. Please send M&A announcements to M&A@MarshBerry.com. Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC.
