SOURCE: OPTIS Partners

insurance M&A

October 18, 2016 05:30 ET

Insurance Agency Mergers and Acquisitions in Q3 Continue at Fast Pace, OPTIS Partners' Data Reveals

Privately Held Brokers and Banks Scoop up Both Property-Casualty Agencies and Employee Benefits Brokers as Valuations Stay High

CHICAGO, IL--(Marketwired - October 18, 2016) - The number of insurance agency mergers and acquisitions over the first ninth months of the year rose from 338 in 2015 to 344 this year, OPTIS Partners' new quarterly report reveals. There were 108 deals announced for the quarter, up from 104 in 2015.

"M&A activity continues to increase," said Timothy J. Cunningham, managing director of OPTIS, 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.

"Achieving organic growth is challenging, so acquisitions are key growth strategy for many firms, especially those backed by private-equity capital," he added.

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

Private-equity-backed firms continue to drive the M&A market, accounting for more than half of all reported transactions over the first three quarters. One firm, Acrisure, made 44 acquisitions. Overall, there's been a slight increase in the privately owned broker group and more slippage in the public broker activity levels in 2016.

"Perhaps surprisingly, bank acquisitions are up almost 50 percent from last year," Cunningham said.

Looking at deals by seller type, property-casualty agencies continue to be the focus of acquisitions, accounting for 53 percent of the deals year to date. Sales of employee benefits brokers have picked up in 2016, making up 19 percent of the total.

Strike While Iron Is Hot

"This period of insatiable buyer appetites and aggressive pricing won't last forever," said Daniel P. Menzer, CPA, partner with OPTIS. "If you are a potential seller, consider acting sooner than later while the irons are hot and the pricing is favorable."

"If you are a buyer, make sure you are doing your homework on the potential seller and have fully evaluated their risk and growth potential. Don't overpay," he said.

Despite the furious pace of M&A, most agency owners aren't interested in buying or selling at any given point. For them, patience is a virtue.

"If you're neither buyer nor seller, ignore all the hyperbole and focus on growing your agency and improving your metrics every day. Keep your long-term plans in sight and take the necessary steps to position yourself to achieve your goals," Menzer said.

The full report can be read at www.optisins.com/articles_and_thought_pieces/read.php?id=31.

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 (www.optisins.com) has been ranked as the fifth most active agent-broker M&A advisory firm in 2014, 2015 and 2016 to date by SNL Financial.

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