{"id":15849,"date":"2024-01-02T15:45:21","date_gmt":"2024-01-02T20:45:21","guid":{"rendered":"https:\/\/www.bbinsurance.com\/?post_type=insight&p=15849"},"modified":"2024-01-02T15:45:21","modified_gmt":"2024-01-02T20:45:21","slug":"insurance-ma-outlook","status":"publish","type":"insight","link":"https:\/\/www.bbrown.com\/us\/insight\/insurance-ma-outlook\/","title":{"rendered":"2024 Insurance Mergers & Acquisitions Outlook"},"content":{"rendered":"

As we look back on 2023, it\u2019s clear that the intensity of the post-pandemic mergers and acquisitions (M&A) surge has been gradually winding down. But what does that mean for 2024?<\/p>\n

Insurance M&As were down 24% in the first half of 2023<\/a>[1] from the same period last year, with the lowest first-half tally of deals since 2020. The drop continued into the third quarter, with 34% fewer deals year-over-year<\/a>[2]. The total M&A deal count for 2023 is an anticipated 750 transactions, less than any year in the post-pandemic bubble.<\/p>\n

In the past decade, private equity firms have seen substantial returns due to the low cost of borrowing and the increase in valuation multiples. But the pendulum is beginning to swing the other way. In the past 18 months, the cost of capital has risen, and valuation multiples have plateaued and even decreased slightly in some cases.<\/p>\n

Here are three key trends that will impact insurance M&A deals in 2024:<\/p>\n

1) Economic pressures will continue to impact cash flow.<\/strong><\/p>\n

The financial landscape for highly leveraged firms \u2014 firms with more debt \u2014 hinges on the delicate balance between inflation, interest and the hardening of rates. Recent trends indicate a plateau in inflation while interest rates may remain high, meaning highly leveraged firms may not have as much capital to invest in acquisitions. In this scenario, firms with low debt will only be marginally impacted. However, the significant loss of positive cash flow to highly leveraged firms could create financial challenges and potentially slow down growth and expansion plans, impacting their attractiveness to sellers.<\/p>\n

As debt financing becomes more expensive and harder to come by, buyers \u2014 private equity firms in particular \u2014 will also be compelled to explore alternative financing strategies, such as offering preferred shares, which typically dilute value for common shareholders.<\/p>\n

2) Healthy demand remains for high-quality firms.<\/strong>\u00a0<\/strong><\/p>\n

This constraint on resources will force buyers to focus more on top-quality firms, and second and third-tier firms will face challenges due to the reduced number of buyers.<\/p>\n

Firms can stand out with well-defined succession plans, high-profit margins, a demonstrated track record of organic growth, a strong sales culture and value add, diverse carrier partners and effective risk management practices.<\/p>\n

3) What sellers are looking for is changing.<\/strong><\/p>\n

The rising costs associated with people and technology have made sellers more receptive to looking beyond money, cash and stock. The values associated with quality now include leadership, recruiting, cybersecurity, technology and carrier relationships.<\/p>\n

These \u201csofter\u201d values are now considered steadfast and non-negotiable aspects of evaluating the worthiness of a buyer. Both selling and buying firms are looking for transaction partners who can not only appreciate the current value of the firm but also enhance it with additional business capabilities and career opportunities for their team.<\/p>\n

How to navigate through these trends<\/strong>\u00a0<\/strong><\/p>\n

The once feverish post-pandemic insurance M&A surge is not going away, but it is settling into a more measured rhythm. The numbers tell a story of decreased deal counts, some economic pressures and a discernible flight toward quality, with buyers focusing on top-tier firms. This shift is not just a consequence of economic dynamics but a strategic move by buyers looking for lasting value.<\/p>\n

For potential sellers, the message is clear: focus on operating a top-quality firm. Building a business that excels in all aspects \u2014 from high-profit margins to effective risk management practices and employee growth opportunities \u2014 positions your business in a class of successful enterprises that can generate premium offers when the time is right. Success in M&A is not just about the timing of the sale but the quality of the business being sold.<\/p>\n

If you are considering M&A in the next six to 12 months, don\u2019t just examine the financial aspects but look at the qualitative aspects as well. What do you want beyond the dollars?<\/p>\n

Interested in speaking with our Mergers & Acquisitions team? <\/strong>
\nEmail acquisitionsdept@bbins.com<\/strong><\/span><\/a> or contact us directly below.\u00a0<\/strong><\/p>\n\n\n\n
Vaughn Stoll
\n<\/strong>Senior Vice President & Director of Acquisitions
\nvstoll@bbins.com<\/strong><\/span><\/a>\u00a0 |\u00a0 (386) 239-8899<\/td>\n		Mark Prampero
\n<\/strong>Regional Director of Acquisitions
\nmprampero@bbins.com<\/strong><\/span><\/a>\u00a0 |\u00a0 (386)\u00a0 239-7292<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

\"\"<\/p>\n

Acquisitions for Agency Owners
\n<\/strong>2024 Insurance Mergers & Acquisitions Outlook
\nby Vaughn Stoll, SVP & Director of Acquisitions
\nco-authored by Mark Prampero, Regional Director of Acquisitions<\/em><\/p>\n

Subscribe to Vaughn’s Acquisition for Agency Owners and view this blog on LinkedIn here<\/a><\/strong><\/span>.<\/p>\n

 <\/p>\n

[1] Business Insurance, \u201cBroker M&A deals fall in first half<\/a>,\u201d July 17, 2023.
\n[2] Optis Partners, “Q3 2023 Merger & Acquisition Update<\/a>,” October 30, 2023.<\/h6>\n","protected":false},"excerpt":{"rendered":"

There are many misconceptions about mergers and acquisitions. Understanding the ins and outs of selling a business \u2014 and separating the myth from reality \u2014 can go a long way when you\u2019re considering selling your firm.<\/p>\n","protected":false},"author":44,"featured_media":18767,"template":"","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"insight_category":[142,131,134,133],"class_list":["post-15849","insight","type-insight","status-publish","has-post-thumbnail","hentry","insight_category-acquisition","insight_category-merger-articles","insight_category-mergers-acquisitions","insight_category-thought-leadership"],"acf":[],"yoast_head":"\n2024 Insurance Mergers & Acquisitions Outlook - Brown & Brown<\/title>\n<meta name=\"description\" content=\"There are many misconceptions about mergers and acquisitions. 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