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

The report covers gross sales of US and Canadian businesses 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 mentioned that varied components contributed to the slowdown in deal exercise. Rising capital prices, elevated leverage, and a lowered variety of enterprise homeowners ready to promote had been major causes for the decline, Germundson mentioned.

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

Notable shifts in consumers’ habits had been noticed, the place earlier energetic contributors like Acrisure and PCF Insurance coverage notably lowered 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 Providers 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 improve in acquisitions, now comprising 6% of the entire offers.

P&C-only businesses had been the main sellers, representing 62% of the entire transactions, adopted by businesses 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 businesses, consulting, and different companies related to insurance coverage distribution.

Whereas plainly exercise has certainly slowed, OPTIS associate Dan Menzer mentioned that there are nonetheless a variety of offers being executed. A variety of consumers not strapped with debt are additionally nonetheless upping their deal move, a pattern which may push M&A to return to pre-bubble tempo.

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

In a latest 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 companies to keep in touch with.

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