M&A outlook bullish for insurance brokers: Report
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Insurance brokerage mergers and acquisitions activity is expected to remain robust this year, despite macroeconomic challenges, according to a report by Reagan Consulting released Tuesday.
“There are still a significant number of well-capitalized buyers in the market anxious to do deals. As a result, we expect robust deal activity to continue in 2023 and accelerate from the 99 transactions completed in the first quarter,” the Atlanta-based M&A consultant said.
That total was down 26.7% from 135 in the prior-year period and 43% from 174 in the fourth quarter of 2022.
Several of the most active buyers have experienced financial disruption from the significant increases in interest rates since the middle of 2022, the report noted.
Some consolidation among acquirers is expected as the marketplace and companies continue to mature, the report said.
M&A multiples overall were unchanged in the first quarter, compared with the fourth quarter of 2022, while multiples for large, high-quality assets increased.
The average brokerage M&A valuation in the first quarter was 12.5 times earnings before interest, taxes, depreciation and amortization for a well-run brokerage with $3 million to $5 million in revenue, with a further three times EBITDA available through an earn out based on future performance.
Privately held brokers posted organic growth of 11.1% in the first quarter — the highest reported growth rate recorded since the survey launched in 2008, while public brokers posted first-quarter organic growth of 9.7%.
Commercial property/casualty lines continued to lead the way, posting first-quarter organic growth of 11.7% – the highest rate in the survey’s history, buoyed by the continued hard market, inflation and a healthy economy.
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