A current report from OPTIS Companions’ M&A database revealed a notable drop in introduced insurance coverage company mergers and acquisitions in the course of the first three quarters of 2023. The figures present a decline to 534 transactions, down from 729 in 2022, marking a major lower.

The report covers gross sales of US and Canadian companies coping with property and casualty (P&C) insurance coverage, in addition to these managing each P&C and worker advantages or solely worker advantages. The information from 2022 onwards additionally encompasses life/monetary companies, consulting, and different companies related to insurance coverage distribution.

OPTIS associate Steve Germundson stated that varied elements contributed to the slowdown in deal exercise. Rising capital prices, elevated leverage, and a decreased variety of enterprise house owners ready to promote have been main causes for the decline, Germundson stated.

Crunching the figures – has M&A motion slowed down?

Notable shifts in consumers’ habits have been noticed, the place earlier energetic contributors like Acrisure and PCF Insurance coverage notably decreased their deal exercise by 81% in comparison with 2022. Nevertheless, new leaders emerged, with Broadstreet Companions and Hub Worldwide main the transactions, finishing 43 and 37 offers, respectively.

Different vital consumers included Inszone Insurance coverage Companies and Leavitt Group, every closing 27 offers, adopted by World Insurance coverage Associates with 24, and Arthur J. Gallagher with 25 transactions.

The information additionally highlighted variations in exercise among the many most energetic consumers, as 4 of the highest 10 consumers accomplished fewer offers within the first three quarters of 2023 in comparison with 2022.

The breakdown of consumers into particular teams revealed that non-public equity-backed/hybrid brokers remained dominant, accounting for 67% of all transactions, whereas privately held brokers moved up barely to 24%. Moreover, publicly held brokers noticed a minor enhance in acquisitions, now comprising 6% of the entire offers.

P&C-only companies have been the main sellers, representing 62% of the entire transactions, adopted by companies focusing solely on worker advantages and people dealing with each P&C and worker advantages. The report additionally outlined gross sales by MGAs, TPAs, and sellers of life/monetary companies companies, consulting, and different companies related to insurance coverage distribution.

Whereas evidently exercise has certainly slowed, OPTIS associate Dan Menzer stated that there are nonetheless loads of offers being carried out. Quite a few consumers not strapped with debt are additionally nonetheless upping their deal circulate, a pattern which may push M&A to return to pre-bubble tempo.

“We proceed to see valuations holding, particularly for engaging sellers. The financial change of rising rates of interest and a discount within the provide of sellers has basically modified the worth proposition that the insurance coverage distribution enterprise represents. It has not decreased the demand from a nonetheless sturdy group of consumers. We count on the valuation setting to carry relatively regular, although we may see that soften barely for much less engaging corporations over the approaching quarters,” OPTIS managing associate Tim Cunningham stated.

In a current IB interview, Marsh McLennan Company (MMA) CEO David Elsick revealed that the corporate’s M&A pipeline “has by no means been higher,” and that there are nonetheless high-quality corporations to keep in touch with.

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