The number of agency-brokerage mergers and acquisitions fell to 248 in 2013, down from 299 in 2012, according to a recent analysis from Chicago-based investment banking and financial consulting firm OPTIS Partners, LLC.

The decline is not surprising in the wake of a booming 2012, when sellers rushed to make year-end deals in order to beat the 2013 increase in federal capital gains tax from 15 to 20%. But it does mean buyers are getting impatient.

“Throughout the year, we began to see an uptick in pricing, with not as much inventory but a lot of demand created by the common active buyers,” says Tim Cunningham, managing director of OPTIS, who prepared the analysis alongside senior partner Daniel Menzer. “The buy-side group, which was very quiet in the first half of the year because there was less inventory, was kind of chomping at the bit to do deals.”

“Agent-Broker Mergers & Acquisitions Statistics: 2013 – A Year in Transition” reports that private-equity backed agencies were the year’s biggest buyers, making 94 acquisitions compared to 88 in 2012. Privately owned insurance agencies came in second with 85 acquisitions, followed by public brokers with 33, banks with 27 and all others with 9.

Cunningham explains private-equity firms are attracted to the insurance distribution for two reasons: reasonably predictable cash flow and relatively low capital requirements. “If you’re in the industrial sector, you buy a company and they have a couple old factories and you have to re-tool them—that’s millions of dollars in machinery,” he says. By contrast, “insurance distribution doesn’t require a lot of capital. The business fundamentals are good.”

On the seller side, p-c agencies dominated with 42% of sales. Agencies that sell both p-c and employee benefits accounted for 22% of transactions; employee benefits agencies, 22%; and other agencies, 12%.

While the sizeable portion of employee benefits sales was unexpected in light of ongoing issues with health care reform, Cunningham says buyers may have been motivated by scale—“there’s some business risk there, but everything we do has risk”—and sellers were under serious pressure. If they weren’t able to add value for their clients, “they were better off selling at some discount, making it out in an earn-out and getting at least some value, as opposed to being out of business in three years,” he explains.

Regardless of business focus, that might become a stronger possible option for all agents and brokers. While an active buyers climate is always a favorable one for agents who are looking to sell, the clock is ticking.

“I don’t want to sound like Chicken Little, but if I were an imminent seller looking out three to eight years, I would be thinking about pulling the trigger sooner rather than later,” Cunningham says. “If the pipeline gets too full, the supply is too great. There will always be buyers, but at what price?”

If selling is in the cards, smaller firms in particular might want to consider getting the wheels in motion while the odds are in their favor. “The message isn’t ‘Boy, do something tomorrow,'" Cunningham says. "But the problem is, do you get to Malcom Gladwell’s tipping point if you’re too late to the dance? The train has maybe left the station.”

Meanwhile, 2014 is off to a strong start for agent-broker mergers and acquisitions, with January reporting one of the most active months on record for closed deals.

Jacquelyn Connelly is IA assistant editor.