Insurance Distribution

Insurance Agency Mergers and Acquisitions in 2016 Second Highest Recorded

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OPTIS Partners' Report: Strong sellers' market continues in United States and Canada

Chicago, IL (Feb. 3, 2017) – Mergers and acquisitions of insurance agencies in 2016 were the second-highest ever, according to OPTIS Partners' annual report. The OPTIS database recorded 449 deals in the United States and Canada in 2016, a slight dip from the all-time record of 456 in 2015.

"It was a sellers' market last year, and it will probably remain one in 2017. But the perfect storm' benefiting sellers won't last forever," said Timothy J. Cunningham, managing director of OPTIS, an investment banking and financial consulting firm specializing in the insurance industry.

The report covers reported transactions of agencies selling primarily property-and-casualty insurance, agencies selling both P&C and employee benefits, and employee benefits agencies.

Private-equity backed agencies were 2016's biggest buyers, making 237 purchases, 53 percent of the total. The top two were Acrisure (63 deals) and Hub International (45).

Privately owned insurance agencies came in second, buying 124 agencies. They were followed by public brokers (41), banks (25), and carriers/other (22).

Looking at sellers, sales of property-and-casualty-focused agencies continue to dominate the list, with 54 percent of all sales. Sales of employee benefits agencies rose to become the second most popular category, accounting for 20 percent of sales, up from 17 percent in 2015. Deals for agencies selling both P&C and employee benefits held steady at 17 percent of transactions. The "other" category was 9 percent.

The statistics pointed to these key lessons, according to Daniel P. Menzer, partner.

  • Valuation pricing is driven by the underlying value of the business and by market competitive forces, both of which have many contributing factors.
  • Buyers, in particular smaller and less capitalized firms, need to be careful not to get carried away in the pricing competition for a seller's business only to find out later they can't afford to pay for it.
  • Firms wrestling with trying to perpetuate need to be steadfast in setting realistic valuations for internal transactions without getting overly swayed by actual and anecdotal pricing stories of other agency transactions.
  • For agency owners waiting for the "right time to sell" before jumping on the bandwagon, now is the right time.

The actual number of sales was greater than the 449 reported, as many buyers and sellers do not report transactions, and some acquirers do not report small transactions, Cunningham said.

"The OPTIS database tracks a consistent pool of the most active acquirers, including other announced deals, and is, therefore, a reasonably accurate indication of deal activity in the sector," he said.

The full report, 2016 Agent-Broker Mergers & Acquisitions, can be read online here.

OPTIS Partners was ranked as the fifth most active agent-broker M&A advisory firm in 2014, 2015 and 2016 by SNL Financial.

Insurance agency mergers and acquisitions, US and Canada, by buyer type, 2008-2016. (Source: OPTIS Partners)

Insurance agency mergers and acquisitions, US and Canada, by buyer type, 2008-2016. (OPTIS Partners)

Insurance agency mergers and acquisitions, US and Canada, by seller type, 2008-2016. (Source: OPTIS Partners)

Insurance agency mergers and acquisitions, US and Canada, by seller type, 2008-2016. (OPTIS Partners)

About OPTIS Partners

Focused exclusively on the insurance distribution marketplace, Chicago-based OPTIS offers merger & acquisition representation for 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. For more information, please visit www.optisins.com.

Source: OPTIS Partners


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