Brokerage interest in M&A dips slightly in early 2021: CU survey

For Canadian brokerage principals, interest in mergers and acquisitions as a growth strategy increased dramatically in September 2020, during the second wave of the pandemic, but seems to have cooled somewhat since then, according to the results of Canadian Underwriter’s 2021 National Broker Survey.

That said, even with the statistical dip early this year, brokers’ interest in M&A is still higher now than it was pre-COVID.

More than 200 brokers participated in the survey, of whom 68 were brokerage owners/principals. The survey asked brokerage principals specifically about whether M&A had been beneficial for strengthening their business over the past two years. The survey was conducted in March 2021, just as COVID-19 infection rates started to rise in what is now referred to as the “third wave” of the pandemic.

Whereas only 21% of broker principals selected the M&A option as a beneficial strategy in our pre-COVID 2019 National Broker Survey, that percentage jumped up to 31% last September, during the second wave of the global COVID-19 pandemic. The number has settled down to 26% in 2021, during the third wave of the pandemic.

Among the broker principals who answered the survey, those working in mid-sized brokerages (20-99 employees) and larger brokerages (100+ employees) were far more likely to see M&A as beneficial than principals of smaller brokerages (fewer than 20 employees).

Thirty-one per cent of broker principals in mid-sized brokerages gave a thumbs-up to M&A, while 43% of broker principals in the large houses cited M&A as beneficial or highly beneficial. In contrast, just 6% of broker principals in the small brokerages rated M&A as a beneficial growth strategy.

Brokerage principals with 16-30 years of experience in the business were more inclined (34%) to see M&A as beneficial than principals with less than 16 years of experience (26%) or with more than 31 years of experience (20%).

Brokerage M&A activity has been busy recently. Westland Insurance reported Thursday that it had closed its acquisition of MBS Insurance Brokers, effective Apr. 1. Navacord Corp. added LL Renaissance Insurance Brokerage Canada Limited to its ranks, while Cal LeGrow and Synex Business Performance acquired GoToInsure.ca in a deal announced Mar. 30.

In an interview last year, Jamie Lyons, president and chief operating officer of Westland Insurance, told Canadian Underwriter that adjusting to the early stages of the pandemic “certainly paused” the brokerage’s M&A program. He was referring to the six-month period after COVID-19 was declared a global pandemic in March 2020.

“Over the past six months, we re-focused inwards to respond to the needs of our business, staff, communities and clients,” Lyons said in September 2020, in response to a question about whether the novel coronavirus affected the M&A process in any way.

But then it was full steam ahead for Westland last September. “We are encouraged by how Westland Insurance, the acquired brokers, and the industry at large have fared through COVID, and we are now actively re-engaging in M&A and our strategic growth plan,” Lyons reported.

In August 2020, a BrokerLink executive predicted that the COVID-19 pandemic would accelerate brokerage M&A.

“My view on it is that whenever there is a catastrophic event, like what we see here [with the pandemic], it gives people pause to reflect and to think about things,” Paul Meyer, BrokerLink’s vice president of acquisitions, told Canadian Underwriter in an interview last August. “My view is that it may be why we are getting a lot more activity.”

 

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