Mergers and acquisitions announced by insurance brokers fell to 168 in the third quarter of 2023, a 9% decrease from the second quarter and down 34% from the same period last year, according to Optis Partners LLC.
A key driver in the decline is the slowdown in buying activity by private-equity-backed brokers Acrisure LLC and PCF Insurance Services, which had been two of the most active acquirers over the past several years, the Chicago-based investment banking and financial consulting firm said in a report Tuesday.
The two companies have booked 81% fewer deals so far this year, which accounts for 56% of the year-to-date decrease in total deals, Optis said.
“The 25-month M&A bubble that began in December 2020 is over,” Optis said. “This bubble was led almost entirely by private equity-backed buyers who found many agency owners willing to sell for larger-than-expected valuations.”
The number of deals announced in the third quarter was 24% below the five-year average, the report said.
Higher interest rates have pushed up the cost of borrowing to fund deals.
Significant deals announced in the quarter include Arthur J. Gallagher & Co.’s $510 million purchase of Eastern Insurance Group LLC, and Higginbotham & Associates Inc.’s purchase of Stahl & Associates. Last week, Gallagher also announced the $904 million purchase of Cadence Insurance.
For the year, Optis expects the total number of M&As to reach about 750 – compared with 987 last year – the report said.