SOURCE: OPTIS Partners

insurance M&A

October 19, 2017 14:00 ET

Insurance Agency M&A in Q3 and YTD Continues at Fast Pace, OPTIS Partners' Data Reveals

132 deals in third quarter push total to 457 for first nine months of 2017. Buyers continue the aggressive valuations of property-casualty and employee benefits agencies, and sellers are responding

CHICAGO, IL--(Marketwired - October 19, 2017) - The number of insurance agency mergers and acquisitions over the first ninth months of the year rose from 350 in 2016 to 457 this year, OPTIS Partners' new quarterly report reveals. There were 132 deals announced during the third quarter, up from 113 in 2016.

"There's no end in sight to the upward trend. The appetite of buyers is undiminished, as is the supply of agencies for sale," said Timothy J. Cunningham, managing director of OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.

OPTIS Partners' proprietary M&A database covers U.S. and Canadian agencies selling primarily property-and-casualty insurance, agencies selling both P&C and employee benefits, and those selling only employee benefits.

"It's absolutely certain 2017 will be another record-setting year for M&A activity," Cunningham added. "The activity is fueled by aggressive buyer valuations, in particular from private-equity backed buyers who are flush with cash. And there's a plentiful supply of aging agency principals who need to complete their exit strategies."

The report breaks down buyers into five groups: private-equity ("PE") backed brokers, privately held brokers, publicly held brokers, banks, and all others.

Privately owned brokers took first place in the third quarter, accounting for 65 deals. Private-equity backed brokers bought 50 agencies, while publicly owned brokerages bought 10 firms, and banks made six acquisitions.

However, as noted in the report, the change in classification of Acrisure from a PE-backed to a privately owned firm in November 2016 has caused a significant swing in the totals by buyer type. If not for this change, the PE backed transaction count for the quarter would have been 73 deals compared to only 42 from the privately owned buyers.

Looking at deals by seller type, property-casualty agencies continue to be most popular, accounting for 69 deals in the quarter, more than half the total. Sales of employee benefits brokers have picked up in 2017 totaled 34. 15 agencies selling both P&C and benefits were sold, as well as 15 in the "other" category.

Strike While Iron Is Hot

"Sellers have a great opportunity today," said Daniel P. Menzer, CPA, partner with OPTIS Partners. "If you are a potential seller, consider acting sooner than later while the irons are hot and the pricing is favorable.

"If you're a buyer, do your homework on the potential seller. Fully evaluate their risk and growth potential. Look at the financials in depth and consider qualitative factors. Overpaying can be deadly."

The full report can be read at http://optisins.com/articles/OPTIS_MA_Summary-Sept_2017.pdf.

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.

OPTIS Partners has been ranked in the top most active agent-broker M&A advisory firms in 2014, 2015, 2016 and for the first nine months of 2017 by SNL Financial.

Focused exclusively on the insurance-distribution marketplace, Chicago-based OPTIS Partners (www.optisins.com) 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.

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