By much how did M&A deals increase year over year?

The M&A market continues to burn red-hot, with deals for property & casualty and benefits brokers in Canada and the United States up 16% in the first half of 2022 compared to 2021, according to M&A advisory firm OPTIS Partners.

In total, there were 427 announced insurance agency/brokerage mergers and acquisitions in the first half of the year compared to 369 for the same period in 2021, showed data from OPTIS Partners’ M&A database.

“The pace in the first six months of 2022 is 13% above the previous first-half five-year average, a period regarded as the most active M&A market ever,” Chicago-based OPTIS said in a press release Monday. “Following the typical first-quarter lull, the second quarter of 2022 shot up 20% in volume to become the fourth-most-active quarter of all time.”

In Canada, the second quarter saw a slew of acquisitions beginning in April with BrokerLink and Westland Insurance acquiring a combined four brokerages in northern and southern Alberta, Saskatchewan and Manitoba. Westland bought two Ontario-based brokerages the following month.

In June, McDougall Insurance & Financial, BrokerLink and StoneRidge Insurance Brokers all announced M&A deals, while one of B.C.’s largest brokerages, Axis Insurance Managers, acquired an aviation and aerospace broker.

The third quarter is already off to a strong start, with BrokerLink closing three more acquisitions across Canada in July. Gallagher also bought an executive search firm operating throughout Canada and the U.S.

“One of the drivers is the expanded appetite of the most active buyers to look at businesses adjacent to the agency/brokerage business,” said Steve Germundson, a partner at OPTIS. “Some 53 of the 427 announced deals came out of life/financial services, actuarial and human resources consulting, technology, and other business related to insurance distribution.”

However, deals made in the traditional brokerage segment only saw a 1.5% increase, said OPTIS managing partner Timothy J. Cunningham. “There simply aren’t the same number of sellers there as in the past. But buyers still have a lot of capital to deploy, and they are finding opportunities to fill other needs in their businesses with firms in this expanded space.”

Traditionally, OPTIS reports cover three types of sellers: Canadian and U.S. brokerages offering primarily P&C insurance, brokerages offering both P&C and employee benefits, and those offering only employee benefits. But because buyers have broadened their acquisition targets, OPTIS for the first time in 2022 is including all other sellers – life/financial services, consulting, and other businesses associated with insurance distribution.

The report breaks down buyers into four groups: private equity-backed/hybrid brokers, privately-held brokers, publicly-held brokers, and all others.

The private equity-backed/hybrid group of buyers maintained their dominance in the buying spree, with 76% of all transactions for the first half of the year. Transactions between private parties accounted for 15%.

Conversations with buyers indicate the second half of the year should be robust, Germundson said. While the final tally may not be as high as 2021, it could prove to be close, he said.

“We anticipate deal count to rise through end of 2022 in spite of general economic headwinds,” the report said. “We anticipate more transactions in the expanded categories as buyers are looking to put capital to work, fill holes in existing operations, and round out revenue opportunities.”

 

Feature image by iStock.com/Cecilie_Arcurs