Growing Momentum in Insurance Distribution M&A Market in 2024

The insurance distribution mergers and acquisitions (M&A) market is witnessing momentum in 2024, with strong first-quarter performance suggesting an active year ahead, according to a MarshBerry Waypoint report. Buyers started the year optimistically, supported by a strong end to 2023. Improved market conditions and the Federal Reserve's support for potential interest rate cuts have renewed buyers' desire for acquiring earnings before interest, taxes, depreciation, and amortization (EBITDA). Despite a Consumer Price Index rise of 3.5 percent in March, the Fed remains optimistic about rate cuts later this year, MarshBerry said.

First-quarter data indicate escalating supply and demand for insurance brokerages. Many firms, more comfortable with their cash positions, aim to acquire more in 2024 than in 2023, projecting a more aggressive M&A strategy due to the prospect of lower debt capital costs, according to MarshBerry findings.

Sellers are equally motivated, partly due to concerns about the impact of the upcoming presidential election on capital gains taxes, MarshBerry said. President Biden's second-term tax plan, which includes capital gains tax increases, and the expiration of the Tax Cuts and Jobs Act at the end of 2025, add to the urgency. This alignment of buyer and seller motivations could drive M&A activity to levels reminiscent of 2021–2022.

M&A Market Update

As of April 30, 2024, 197 insurance brokerage M&A transactions have been announced in the United States, marking a 43.8 percent increase from the same period in 2023, which saw 137 transactions. Private capital-backed buyers dominate, accounting for 72.1 percent of the transactions, a significant rise from 2019's 59.3 percent. Independent agencies have completed 32 deals in 2024, slightly up from 2023's 15.6 percent to 16.2 percent of the market. Bank buyers have been less active, with only two transactions recorded this year, according to the update.

The top 10 buyers contributed to 54.3 percent of all announced transactions through April, with BroadStreet Partners, Inszone Insurance Services, and Integrity Marketing Group making up 25.4 percent of the total 197 transactions, per MarshBerry.