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January 26
08:46 2021

Acquisition Acumen

By James Graham


Seven attributes required for purchasing in today’s insurance distribution space

Despite a pandemic and a global recession, the number of well-capitalized buyers of insurance distributors continues to grow. At MarshBerry, we estimate the market consists of at least 50 such buyers, with new ones forming regularly. Thriving through events as cataclysmic as the 2008 financial crisis and the current pandemic, past investor success continues to attract an immense amount of capital that is focused on improving efficiency and consolidating an extremely fragmented marketplace.

New entrants who do not fully commit to a sophisticated and aggressive M&A strategy will fall short of achieving their goals.

To help ensure success, at least seven key table stakes attributes are required to be a successful buyer in today’s insurance distribution space:

  1. Source capital. In order to help drive success in today’s merger and acquisition (M&A) environment, it is necessary to have an acquisition facility set up to allow a buyer to fund deals in a timely manner—and at a competitive cost of capital. Some of the most successful buyers have a complex capital structure funded by multiple sources.
  2. Implement an M&A strategy. Gone are the days where an agency or brokerage can take on capital and opportunistically pursue growth through M&A. It is necessary for brokers to have a detailed strategy where M&A is a core part of their business. At a minimum, buyers should have a dedicated corporate development team with clear performance indicators and investment criteria.
  3. Create value. Financial engineering alone is not enough to successfully create value. Buyers can create value post-acquisition by providing resources through centers of excellence, enhanced carrier market access, sales and producer support, and other competitive advantages achieved through scale. Post-closing, it is key for buyers to increase organic growth rates and/or profit margins. We have seen buyers’ leverage ratios pushed too high, causing them to go underwater due to overpaying for non-performing businesses.
  4. Champion a culture of M&A. Some of the most successful buyers have led the market for longer than 10 years. These serial acquirers have built a culture of M&A. Every leader in their company understands the importance of their firm’s M&A strategy and their role in it. A sign that a firm has built a successful M&A culture is that their corporate development teams enjoy proprietary deal sourcing. Several successful buyers have shared that in the early days of their firm, over 80% of their deals were sourced from investment bankers and business brokers. However, more than 80% of their deals are now self-sourced.
  5. Pay market prices. When presented with a quality target opportunity, it is a waste of time to offer prices that are below market. It is currently a strong seller’s market, and buyers who consistently put forth below-market bids consistently fail. In turn, these buyers may get fewer opportunities to bid in the future. If you are a newer buyer, be prepared to pay above-market pricing to win deals to build credibility in the market.
  6. Have an equity growth story. One key tool in a buyer’s tool chest is the buyer’s stock. According to our proprietary deal database, some of the most successful buyers can see their investment have returns of anywhere between 300% to 500% in equity value over a three- to five-year period. Considering that the average insurance firm grows at approximately 6% per year, agency and brokerage owners who took stock from a successful buyer over the last five years likely achieved an approximate additional growth in share value of 174% to 374% versus not selling.
  7. Build relationships with centers of influence. New buyers should have relationships with investment bankers and business brokers specializing in the insurance distribution space. Likewise, buyers should build relationships with their key carriers and other professional organizations where potential sellers may be members.

Here’s the bottom line: This is the most crowded and competitive buyer market ever seen. New entrants who do not fully commit to a sophisticated and aggressive M&A strategy will fall short of achieving their goals. It is possible that some of the less successful buyers will be forced to sell below their investment thesis return over the next few years. If your firm is capable of presenting only a few of these attributes, then either pursue a different growth strategy or partner with a firm that can help you achieve all of them.

The author

James Graham, CVA, joined Marsh, Berry & Company, Inc. (“MarshBerry”) in 2015 and currently serves as a vice president in the California office. James’ activities include merger and acquisition services, preparing valuation reports, creating perpetuation plans, providing business planning and general consulting. James is also a relationship manager for MarshBerry’s Connect Networks.

Prior to joining MarshBerry, James was a senior consultant with Deloitte Consulting LLP. While at Deloitte, James provided financial analysis work on a wide range of consulting projects.

James currently maintains the FINRA Securities Industry Essentials (SIE®) Exam in addition to the Series 62, 79 and 63 FINRA Registrations through MarshBerry Capital, Inc., the affiliated FINRA-registered Broker/Dealer of Marsh, Berry & Co., Inc.

James earned a bachelor’s degree in finance from Azusa Pacific University and a Master’s in Business Administration (MBA) from George Mason University. He is also a Certified Valuation Analyst (CVA). Contact him at or (949) 272-0351.


As of December, there had been 646 M&A transactions announced in the United States for the year 2020. The figure was far better than what was anticipated in the beginning stages of the pandemic, when deal activity all but came to a halt for a brief period of time. The deal count in 2020 was a mirror image of 2019, which consisted of 651 announced transactions.

Private capital-backed buyers remained at the top of the market in terms of number of announced trans-actions, completing 66.9% of all announced transactions. Independent firms accounted for 95 (14.7%) of the 646 announced deals. This buyer segment had slipped considerably in terms of overall deals as the year progressed. Seller line of business remained consistent in 2020, with 51% being property and casualty (P-C) focused, 32% multi-line and 17% in the employee benefits and consulting space.

The Top 10 most active buyers completed 336 (52.0%) of the 646 total announced transactions.

Notable 2020 Q4 transactions

Alera Group acquired Lighthouse Group, effective December 1. Light-house Group is a Midwest leader in employee benefits and P-C insurance solutions. Lighthouse has completed 40 acquisitions in its 25-year history and now serves clients in more than 20 verticals, with specialties including construction, manufacturing, and retail.

On December 17, four premier

retail brokers announced that they intend to combine to form Oakbridge Insurance Agency LLC. The four firms are Founders Insurance, Hutchinson Traylor Insurance, McGinty-Gordon & Associates, and Waites & Foshee. Oakbridge received a strategic investment from Corsair Capital LLC as a part of the transaction and will be one of the country’s “Top 100” agencies.

On December 31, BRP Group, Inc., completed its acquisition of Burnham Benefits Insurance Services, Inc., and Burnham Gibson Wealth Advisors LLC. With annual revenues of approximately $52.6 million, Burnham sits at #79 on Business Insurance’s “Top 100” list of U.S. brokers, and represents one of the largest partnerships in BRP Group’s history.

Investment banking services offered through MarshBerry Capital, Inc., Member FINRA Member SIPC and an affiliate of Marsh, Berry & Company, Inc., 28601 Chagrin Boulevard, Suite 400, Woodmere, Ohio 44122 (440) 354-3230.

Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only. Totals may change from month to month should an acquirer notify MarshBerry or the public of a prior acquisition. Statistics are preliminary and may change in future publications. Please feel free to send any announcements to M&

Source: S&P Global Market Intelligence,, and other publicly available sources.

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