Insurance Agency M&A - 2006
Insurance agent and broker merger and acquisition activity has slowed somewhat in 2006, but the market still remains strong for sellers. Some conclusions from recent articles:
- Market conditions propelled 2005 agency and brokerage mergers and acquisitions to their second-highest volume since 2000, and indications are that another boom year could be coming
- With 216 announced transactions, consolidation in 2005 was just slightly under the record 2004 level of 224 deals
- Many public brokers … have no choice but to augment flat or anemic organic results with acquired growth
- It's still being driven by growth expectations of the publicly traded brokers. Without acquisitions, most of them aren't even growing organically
- Declining organic growth rates and fewer high-quality agencies for sale will continue to have a ripple effect on industry M&A pricing
- It is very likely you’ll see a PEG [private equity group] partner with an emerging management team of industry professionals attempt to roll up the next leading firm in 2006-2007
- The small-to-midsize broker who seeks to remain independent should be able to capture a significant amount of fallout from the larger brokerage firms trying to purge their middle-market clients due to cost constraints
- Contingent commissions will continue "as is" for the near future
- Buyers are reporting a lower inventory of quality candidates
- By remaining privately-held, [agencies] are finding that they can enjoy a competitive advantage in the marketplace in a number of areas—ranging from their recruiting of talented employees to their ability to continue receiving contingent and bonus income
- The money came off the shelf and is currently being deployed into a number of different acquisition areas, both in the retail and on the managing general agent side of the business
Articles of interest:
2006: The year when changes take hold
Intermediary M&A Boom May Get Louder In 2006
Post Spitzer, Merger Activity Picking Up…
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