April was another mediocre month with just 13 deals announced.
April was another mediocre month with just 13 deals announced. That brings the year-to-date total to 51, a paltry 58.6% of 2012’s total through April. Last year at this time we were celebrating a strong start with 87 transactions.
We are left wondering what the market will bear this year. The market has many story lines but none probably more interesting than who is buying and who is not. So far, 26 transactions have been completed by 26 buyers who did not complete a transaction in 2012. This continues to be good news for sellers. If for no other reason, pricing will likely remain at last year’s high marks due to the competition to obtain a quality seller.
The other surprising number is that only three deals have been completed by public brokerages. This compares to 20 through the first four months last year. This slow start is likely attributable to the frantic 2012 finish, but I believe we can expect this buying segment will quickly begin to increase its closings. Two of the three transactions to date were completed by Arthur J. Gallagher (AJG). It is worth noting that AJG continued its U.K. expansion, announcing the acquisition of Property & Commercial Limited. This firm provides retail and wholesale insurance products and services as well as affinity business and includes a managing general agent.
National Financial Partners (NFP) notched the third deal by a public brokerage but made bigger headlines with the announcement of its own sale. Private equity firm Madison Dearborn Partners is leading the charge on this transaction. A 26% premium was offered over NFP’s closing share price of $20.05 on March 12, 2013, the last day of trading prior to press reports that NFP was considering a possible sale.
Private equity backed buyers have completed 12 deals (24% of transactions). While fewer than the 15 deals private equity completed through the same period in 2012, they represent a greater percentage of total deals (17%), since totals are down from last year. Digital Insurance and AssuredPartners sit atop the leader board with four deals each for 2013. Tied in second place with AJG are the private equity backed Hilb Group and Confie Seguros, each with two deals.
The wholesale market continues to show signs of life with 13 transactions. This includes managing general agents, underwriters and affinity/specialty business. Those currently in the space appear to be looking to expand, and private equity firms are considering entering this realm.
Buyers will likely continue to be competitive with pricing and other conditions as long as there is a big supply of buyers and limited supply of quality sellers. Sellers have a vast choice of partners, and they would be well advised to choose wisely. Stay tuned to see which buyers are able to differentiate themselves and lead the charge.