The past two years have seen M&A activity at the extremes. A record-setting 307 transactions were announced in 2008, yet last year’s 185 transactions mirrored the tepid early years of the decade. 

It appears the boom and bust of insurance brokerage M&A has come and gone and all will get back to normal. But normal, of course, is relative.

The financial tsunami of late 2008/early 2009 continues to slowly recede, and rates continue to hold steady with slight firming here and there. Positive financial and insurance market-related indicators have put a spring back in the steps of M&A. Eighteen deals were announced in February, bringing the market barometer to 42 for two months—ahead of last year’s pace but well behind the boom years.

With the exception of Willis Group Holdings, the public brokerages experienced negative organic growth for 2009, with the composite for the five brokerages being -.9%. Clearly, declining premium rates and other market factors had a negative impact on these firms’ ability to grow organically; hence, acquired growth becomes important in achieving positive overall growth in this market.

Insurance brokerages are dominating the acquisition landscape, accounting for 38 of the 42 deals. Brown & Brown acquired three agencies in February, and Arthur J. Gallagher did two deals. All five public brokerages are on the scorecard two months into the year.

Marsh & McLennan Agency continued its expansion, acquiring Haake Companies of Overland Park, Kan., which had $11 million in annual revenue. So far, it has acquired sizable agencies in the Northeast, Midwest, and Southwest as part of its plan to build a national brokerage.

Once public and now private, USI Holdings, which only did one deal in 2009, announced the acquisition of the Ohio, Kentucky and Missouri employee benefits insurance brokerage offices of National City Insurance Group, part of the PNC Financial Services Group. The deal should bring about $13 million in annual revenues to USI. It’s long been anticipated that PNC would sell the insurance brokerage business from National City Insurance Group.

That deal wasn’t the only bank divestiture. Three others sold their insurance operations so far this year. Two others made acquisitions.

Employee benefits agencies may be of more interest despite the looming uncertainty around healthcare reform. Ten benefits deals took place, matching the number of property-casualty commercial agency purchases. One issue that might drive consolidation in this space is the change believed to be coming to the future business model of employee benefits agencies. It is said that old-school brokerages, those that “milk the cow,” will fall by the wayside and disappear, while the new-school brokerages (those that become more involved consulting with their benefits clients) will innovate and prosper.

With the economy and insurance market stabilizing, both buyers and sellers are more willing to take a look at opportunities. One trend seen emerging is the “one-off” buy or sell that may be taking place with the agency down the block or between agencies in different states that shared business for years. This trend is expected to continue as the quest to maximize shareholder value continues in an ever-changing market.