Year-over-Year, M&A Activity Sustains a Moderate Pace

Buyers and Sellers Remain Cautious

Insurance brokerage deals in the second quarter of 2010 barely bested the number of deals during the second quarter of 2009 bringing year-over-year activity slightly ahead of last. Forty-six transactions were announced from April through June compared to 43 transactions last year which brings the year-to-date tally to 103. A persistent soft market and weak economy continue to drag on merger and acquisition (M&A) activity as buyers and sellers remain cautious.

Arthur J. Gallagher (AJG) is the most active acquirer of agencies year-to-date with nine transactions or 9 percent of all transactions. Four of these deals came in the second quarter, including the acquisition of Risk & Reward Group, an employee benefits consultant and insurance broker located in the U.K. AJG is slightly more acquisitive this year than last when seven transactions were announced through the second quarter.

Trailing AJG by one deal is Brown & Brown (B&B) with eight transactions having doubled its activity from the prior year period. The four deals in the second quarter were separate, but interrelated, P/C agencies based in Connecticut with combined annual revenue of $7.2 million.

Trailing AJG and B&B in deal count are New Jersey-based regional broker Bollinger and Marsh & McLennan Agency (MMA), each with a total of three deals. All of Bollinger’s transactions were announced in the second quarter and all were based in New Jersey. One of its deals was of a benefits agency that provides employee benefit products and services to independent brokers located throughout the tri-state area. The agency, John J. Slattery Associates, will be combined with Bollinger’s GA department and operate as Slattery Associates.

MMA, in its quest to be a formidable agency in the middle market, continued down that path acquiring another agency in Boston. The full-service insurance brokerage with capabilities in employee and executive benefits, HR services, and retirement services with 60 employees and approximately $14 million in annual revenue gives MMA a strong presence in New England. MMA has acquired $185 million in revenue in less than one year.

Despite the slight up-tick in M&A, the majority of activity has been concentrated among just a few broker-acquirers. Usually quite active and leading acquirers, Hub International, Ascension Insurance and Wells Fargo have completed fewer transactions in 2010 versus 2009. Banks, insurers and others have made few acquisitions.

One transaction in the second quarter peaked M&A followers’ interest when AmWINS Group announced in April that it would acquire Texas-based Colemont Insurance Brokers. Combined, the companies will distribute more than $4.8 billion in premiums, ranking it the second largest wholesaler by total premium volume that includes P/C and employee benefits. The transaction provides AmWINS with its foray into the international community, picking up business in 16 countries outside of the United States and an additional 700 employees to add to its base of roughly 1,100 employees.

Property/casualty rates remained soft in June but showed signs of moderating. The economy overall remains weak and there’s constant chatter whether the Bush tax cuts will expire or not. Traditionally a slower M&A period, the third quarter may not be indicative of what’s to come in the fourth quarter. A lot of deals appear to be in the making, but only time will tell.

Topics Mergers & Acquisitions Agencies Property Casualty A.J. Gallagher