After a bleak M&A environment in 2009, we fortune-tellers thought M&A activity would pick up in 2010. With two solid months of deal closings in January and February, that appeared to be the case.
But here we are four months into the year, and the market barometer with 67 deals is barely above where it was last year. In fact, M&A activity has been on the decline since December, which marks the first time since the Big Deal began that we’ve seen a decline in activity four months in a row.
Just what have the most active acquirers of 2009 been up to? Through April, Arthur J. Gallagher is holding steady as is Brown & Brown with five and four deals, respectively. Incidentally, these two brokerages have already acquired half as many agencies in four months as they did in all of 2009. The Marsh & McLennan Agency (MMA) still has only two deals on its scorecard, but expect more deals, both platform acquisitions and fold-ins, to be announced by MMA as the year progresses. Two other most active acquirers—Ascension Insurance and Wells Fargo—announced their firsts. The only most active acquirer of 2009 to do nada, nothing, zilch so far is Hub International.
Don’t let Hub’s inactivity fool you, though. Historically an active and strategic acquirer, Hub can be expected to announce several deals before year’s end. Acquisitions will continue to play an integral role in its growth initiatives as its private equity (PE) investors stage their exit in the next couple of years.
Like Hub, Ascension Insurance has PE investors, and acquisitions are integral to its growth strategy. Ascension acquired Portal of Nevada, a Las Vegas-based employee benefits firm. It will operate with Walnut Creek, Calif.-based Portal Insurance Agency, which was acquired by Ascension last June.
Wells Fargo got on the scoreboard with its acquisition of Utah-based AIM Administration, an employee benefits firm. Year-to-date acquisitions of employee benefits firms accounted for a quarter of all activity. More often than not, we discuss retail benefit acquisitions like the Ascension and Wells Fargo deals; however, two wholesale employee benefit deals have also taken place. The first was in March when BenefitMall, one of the largest national employee benefits general agencies, acquired NAS Financial Services in New Jersey. In April, Bollinger also acquired an employee benefits general agency, John J. Slattery Associates, also located in New Jersey. If you’ve stayed abreast of how healthcare reform may affect employee benefits brokerages, general agencies could be a saving grace for some.
Wholesale transactions haven’t been newsworthy recently, but April marks the third consecutive month in which wholesale vs. retail as a percentage of the overall monthly deal count has increased. The newswires were all abuzz with one of the largest wholesale transactions in recent memory: AmWINS Group’s acquisition of Colemont Insurance Brokers. While no deal terms were announced, Colemont was last reported to place well over $1 billion in p-c premium. Together, the two companies will place more than $4.8 billion in annual premiums, which factors in AmWINS group benefits business as well. With international capabilities, Colemont provides AmWINS an entrée into the international marketplace.
Despite month after month of declining M&A activity, consolidation must continue. First-quarter earnings from the public brokerages are out, and the results aren’t stellar. Organic growth exists for very few, so growth through acquisition has to be part of the plan for many insurance brokerages, both public and private. The numbers tell the story as 46 different agencies accounted for the 57 brokerage transactions year-to-date.
Correction: Bass Underwriters acquired Independent Insurance Wholesalers, an Oregon-based firm (not a Florida company). The transaction was listed incorrectly in the May issue.