Posted on 01 Mar 2013 by Neilson
Mergers and acquisitions of insurance agencies hit an all-time high in 2012, with 291 reported transactions in the United States and Canada, according to OPTIS Partners' new annual survey.
"Buyers were anxious to acquire and sellers equally anxious to complete their deals before capital gains tax rates went up in 2013," said Timothy J. Cunningham, managing director of OPTIS, an investment banking and financial consulting firm specializing in the insurance industry.
The previous record was 284 in 2008; 2007 and 2011 tied for third with 279 deals.
Privately owned agencies were still the biggest buyers, making 93 acquisitions compared to 101 in 2011. "The decline is perhaps due to greater competition for deals from publicly owned brokers and private equity firms, which together accounted for 53 percent of the deals compared to 45 percent in 2011," Cunningham said.
Banks bought 24 agencies, down from 37 in 2011.
The top three buyers last year were publicly owned broker Arthur J. Gallagher (30 deals), private-equity-backed firm Hub International (21) and PE-backed firm Confie Seguros (18).
On the seller side, sales of property-and-casualty-focused agencies continued to rise, reaching 109, and deals for agencies selling both P&C and employee benefits also rose, to 78. Sales of employee benefits agencies fell slightly, to 66.
"Given the uncertainty about how Obamacare will affect employee benefits firms' revenues and the complexity of implementing federal and state legislation, it's a bit surprising sales of employee benefits-focused firms were so strong," he said.
While it's unlikely the record-setting year will be repeated, Cunningham expects M&A activity to stay strong in 2013.
OPTIS Partners was ranked as the fifth most-active agent-broker M&A advisory firm in 2012 by SNL Financial.
Focused exclusively on the insurance distribution marketplace, OPTIS offers merger & acquisition representation of buyers and sellers, including due-diligence reviews; appraisals of fair market value; financial performance review, including trends and internal controls; ownership transition and perpetuation planning; quality control; E&O loss control; and process improvement. Offices are in Chicago and Minneapolis.