2016 BPS Study

Brokerage Industry Perspectives How Best Practices agencies are leading the way

Key Challenge #2: Record Consolidation and Loss of Independence

Agency mergers & acquisitions have dominated industry headlines in recent years. The pace of consolidation has  increased steadily since 2009, when M&A activity temporarily cooled due to the Great Recession. 2015 was a record  year for deal activity, with 469 announced transactions, according to SNL Financial. 

North American Insurance Brokerage Transactions

469 

Ten  Year  Average  289

342 

342 

300 

293 

262 

238 

237 

221 

188 

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: SNL Financial 

Why are so many agencies selling? There are numerous reasons for the escalation in deal activity, including: 

 Record valuations have been driven by a record number of buyers, including publicly‐traded brokers, privately‐ held agencies, banks and most notably, private equity‐backed buyers.   Private equity’s entrance into the insurance distribution marketplace has been dramatic. As the following chart  shows, private equity firms have grown their share of deals from 4% to nearly 50% over the past decade.   Increasingly, agency owners are concluding that size matters and they are feeling the pressure to get larger as  quickly as possible. Some, believing they can’t get there fast enough, sell.    The natural impulse to remain independent has, for some agencies, been thwarted by an inability or  unwillingness to invest in the next generation of leadership and production. These firms have been left with few  alternatives but to sell.   As client demands have escalated, agents are increasingly turning to third‐party partners to provide access to  the value‐added tools and resources necessary to remain relevant. 

17