There were 300 announced insurance agency mergers and acquisitions in the first half of 2024, down 20% from 385 in the same period in 2023, according to OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry.

The first six months of 2024 marked the lowest first-half total in four years, hitting 26% below the previous five-year first-half average. Further, the second quarter of 2024 marked the sixth consecutive quarter that the deal count has fallen below the long-term trend line.

“We could be only at the beginning of a longer slide, but it seems unlikely," said Steve Germundson, a partner at OPTIS Partners. “A plethora of buyers are still looking to invest capital, and there are still a robust number of independent agencies unable to internally perpetuate their ownership."

“We could likely be approaching a 'normal' level of dealmaking, similar to what we saw around 2017-2019," he said.

“If inflation declines and the Fed posts rate cuts between now and the end of the year, buyers may become more active," Germundson added. “This market is still supply-side driven."

With some sizeable transactions, like Aon's purchase of NFP, taking place in the first half of 2024, OPTIS Partners predicts more large transactions over the next 12 months, “considering the challenges large buyers have to move the 'growth needle' and the difficulties of some large firms to internally perpetuate," the report said.

Meanwhile, the report predicts that smaller transactions will hold steady. With a good deal of buyers, some of whom are returning from the sidelines, and plenty of sellers, “it's conceivable that a pace of 650-750 deals per year could last quite a few years," the report said, adding that valuations should remain strong for sellers possessing a history of growth and a young team. 

BroadStreet Partners recorded the most transactions (46) in the first half of 2024, 77% higher than in the same period last year. Inszone and Hub followed with 27 and 26 deals, respectively. The top 13 buyers accounted for 193 deals, nearly two-thirds of the total. All were private equity (PE)-backed firms except Leavitt Group, a private company, and Arthur J. Gallagher, which is publicly traded.

In total, there were 62 unique buyers of insurance-distribution-related businesses through the first half of 2024, 41 of which did fewer than five transactions and 26 of which did just one. Fourteen of these firms announced their first acquisition.

The PE-backed and hybrid group of buyers accounted for 71% of all transactions for the first half of 2024, while transactions between private parties accounted for 20%. Publicly held brokers and all others made just 7% of deals. PE's investment in insurance distribution is a factor that hasn't changed in several years, the report noted, with this group of investors comprising 60%-80% of the total number of deals in each quarter since 2017.

However, brokers going public may become an emerging trend. “It's quite interesting that there are several brokers openly discussing their intentions on going public in 2024 or 2025, something that hasn't been a factor, other than Baldwin Risk, in many years," said OPTIS managing partner Timothy J. Cunningham. “The market is always evolving."

AnneMarie McPherson Spears is IA news editor.