A report released by OPTIS Partners' M&A database counts a total of 359 confirmed insurance agency mergers and acquisitions during the first half of this year. The sum reflects a 24% decrease from 475 counted in the same period in 2022, according to a Yahoo Finance report.
"The drop-off in deal count continues as we move through 2023, which isn't surprising anyone if for no other reason than the cost of capital has increased so much," Steve Germundson, a partner at OPTIS Partners, said in the reported.
The figure represents “the lowest first-half total since 2020 but nevertheless equal to the previous five-year average,” the Yahoo Finance report revealed.
"We're seeing the effects of relative inactivity of some previously very active buyers, yet others are successfully completing more deals." Hub and Broadstreet Lead Buyers,” OPTIS Managing Partner Timothy J. Cunningham said to Yahoo Finance.
Though a lack of active buyers could have contributed to the decline in deals, there has not yet been a direct cause correlated with the decline, the report noted.
"The nine-quarter deal bubble that began in Q4 2020 is clearly in the rear-view mirror," Germundson said in the Yahoo Finance report. "But we're continuing to see interest in the buy-side from a large number of firms, and there is evidence that valuations for better firms remain strong. If interest rates continue to rise as expected, there may be more buyers forced to the sidelines, creating opportunities for those with stronger balance sheets."
The two buyers who recorded the largest sum of merger transactions during the first financial quarter of 2023 were Hub International and BroadStreet Partners, with 29 and 26 deals, respectively, followed by Inszone, World and Patriot Growth followed with 22, 17 and 16 deals, respectively, the report said.
"An active buyer community is just one part of the equation. The other part is that there is still a large number of aging agency owners who will be providing plenty of supply for the continuing demand," Cunningham said, according to Yahoo Finance.
OPTIS Partners is an investment banking and financial consulting firm specializing in the insurance industry, Yahoo Finance reported.
