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The Rough Notes Company Inc.



August 26
08:56 2021

Acquisition Acumen

By James Graham, CVA


It won’t be surprising if multiple brokers go public over the next few years

Starting in 2007, when Hub International Limited and USI Insurance Services, LLC, were taken private by Apax Partners and Goldman Sachs respectively, private equity (PE) capital has fueled a rapidly increasing consolidation of the insurance distribution industry. In just 14 years, the industry has gone from two PE-backed brokers to more than 25. The backdrop of the 2008 financial crisis provided the PE industry a great case study for the resilience of the insurance distribution industry and helped justify an aggressive pace of acquisitions at premium valuations as the economy recovered.

Today, many of the initial PE-backed brokers are mature and sophisticated firms that will be challenged to drive investor returns with the same tactics they have deployed over the last 14 years. It’s likely that mergers and acquisitions (M&A) will continue to be a core part of their business model as the industry remains fragmented and many mature brokers are seeking to add complementary capabilities such as wealth management and human resources consulting.

The key change on the horizon is the way in which they fund and financially engineer returns to shareholders in the future. PE firms that own the most mature insurance brokers will start to look to the public markets for their next recapitalization event. It wouldn’t be surprising if the market sees multiple brokers go public over the next few years.

While it is impossible to predict the future, it does feel that the industry is ripe for another monumental shift, similar to what took place in the years following the 2008 financial crisis.

One reason why PE is attracted to the insurance distribution space is the opportunity to fuel consolidation and leverage scale to realize significant returns on invested capital. As brokerages mature, the challenge to continue a PE fund’s thesis becomes more and more difficult as each firm reaches scale. Anecdotally, one way this is demonstrated is the idea that growing from $50 million to $150 million in revenue is more achievable than growing from $3 billion to $9 billion in revenue.

This isn’t to say that mature brokers won’t see great returns. It could be argued that the mature PE-backed brokers may be a safer bet from an equity performance perspective, as their management teams have been able to demonstrate impressive year-over-year returns despite the daunting growth needed to achieve them. Regardless, many PE firms investing in these mature brokers are aware of the increasing difficulty in generating the kinds of returns expected and could look to the public markets as an option to exit at a premium valuation.

As a backdrop to why public markets could be the near-term trend, it is important to acknowledge the consistent success of the publicly traded brokers in terms of both M&A and organic growth throughout the last 14 years. Their success has resulted in valuations that are hard to overlook. Wall Street seems to have a favorable view of these businesses.

This has been most recently demonstrated by the success of Baldwin Risk Partners (BRP). BRP decided to break the mold and go directly to the public markets in 2019 for capital to fund their aggressive expansion. BRP was the first traditional insurance broker to go public since 2003, reversing a 16-year trend away from the public markets. The success of BRP is like the canary in the coal mine. It will be difficult for the industry to disregard the access to capital that public markets provide.

PE is not going anywhere and it will remain a significant force in the industry. The industry remains fragmented, and there are many successful PE-backed brokers that will see multiple recapitalization events within the PE space over the next decade.

While it is impossible to predict the future, it does feel that the industry is ripe for another monumental shift, similar to what took place in the years following the 2008 financial crisis. Given the current health of the U.S. public markets, coupled with the number of mature brokers who will continue to need access to larger and larger pools of capital, the move by a portion of the mature brokers to the public market is a reasonable prediction.

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. He 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.


This year, as of June 30, 2021, there have been 299 announced merger and acquisition (M&A) transactions in the U.S. The absence of the Q2 freeze in M&A markets from the pandemic has allowed deal activity to outpace 2020, and we expect retroactive announcements to further contribute to the record-breaking pace of deals being completed.

Private-capital-backed buyers have accounted for 216 of the 299 transactions (72.2%) through June, while independent agencies have held steady at 16.4% of the total deal count. Deal activity in each of our buyer categories has remained proportional to what we have observed over the last three years.

M&A deals involving specialty distributors have continued to move at a pace even greater than that of retail firms. Deals involving specialty targets are up 59.1% year over year at 70 transactions. We expect this pace to continue as we move closer to year end.

BroadStreet Partners, Inc., Integrity Marketing Group LLC, and Hub International Limited (Hub) are the top three most active buyers in the U.S. in 2021, contributing a combined 19.1% of the 299 total transactions. The top 10 most active buyers completed 143 of the 299 announced transactions (47.8% of total).

Some notable transactions announced in Q2:

  • On April 7: Hub announced that it had acquired the assets of Wyoming Financial Insurance (WYFI). WYFI is the largest independently owned insurance agency in Wyoming. The firm specializes in the construction, healthcare, hospitality, and transportation industries.
  • On May 1: IMA Financial Group (IMA) announced that it is partnering with Bolton & Company to expand its brokerage services to California. The combined brokerage will employ 1,200 people and generate over $300 million in revenue, making it a top-20 insurance broker in the U.S. This transaction marks the tenth acquisition in the last 12 months for IMA.
  • On May 5: Hub announced that ithad acquired the assets of Conover Insurance Services, LLC. Headquartered in Bellevue, Washington, Conover is one of the largest insurance and financial brokerages in the Pacific Northwest and employs nearly 100 individuals. The firm specializes in the agriculture, construction, transportation, and tribal industries and is set to strengthen Hub’s specialty practice as it expands its presence in the area.
  • May 24: Truist Insurance Holdings, Inc., announced that it had signed a definitive agreement to acquire Constellation Affiliated Partners from Redbird Capital Partners. Constellation is based in New York City and is an insurance distribution platform comprised of seven managing general agents and program managers. The transaction is reported to add approximately $160 million in annual revenue to Truist’s wholesale division.

Investment banking services offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Co., Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122 (440) 354-3230 Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only. Scorecard year-to-date totals may change from month to month should an acquirer notify MarshBerry or the public of a prior acquisition. 2021 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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