FOR IMMEDIATE RELEASE
CONTACT: Kevin Stipe (404) 869-2532; [email protected]
Deal Flow & Record Valuations for Agents, Brokers Expected to Continue Despite Soft
P-C Market, Slow Economy & Slight Increase in Interest Rates
ATLANTA (May 16, 2017) — The outlook for insurance agency and brokerage mergers and acquisitions remains strong and shows no immediate signs of slowing, according to Reagan Consulting.
At the recent Agency Ownership Summit in Atlanta, cosponsored by Reagan Consulting and the Council of Insurance Agents & Brokers, experts discussed factors and market trends that suggest M&A activity — already at record levels in the past two years — is likely to continue.
The past 20 years have shown a dramatic evolution of the agency and brokerage business, noted Bobby Reagan, CEO of Reagan Consulting. “At our first M&A conference 20 years ago, the question was, ‘Who is buying and at what price?’ There have been many changes in the agency world since then. Productivity in terms of revenue per employee has more than doubled; profitability is up significantly; and the value of agents and brokers has increased markedly. Now, the focus is, ‘Who is prospering, and how are they doing that?'” he said.
Kevin Stipe, president of Reagan Consulting, pointed out that almost 1,000 agency mergers and acquisitions were completed in the past two years, and valuations are at historic highs. According to SNL Financial, “from 2006 to 2017, the average annual number of M&A transactions was 317. In 2015, agencies saw 492 deals, 457 in 2016, and the pace of M&A so far suggests 2017 will be another strong year,” Stipe said.
“With so many transactions occurring, it’s natural to wonder, is the independent agent being hunted to extinction? Available data on the number of agents and brokers indicates that is not the case,” Stipe said. Over the last five years, thousands of new agencies were formed, according to the Independent Insurance Agents & Brokers of America’s (IIABA) “FutureOne Study.”
Reagan Consulting’s analysis estimates that over the last five years, the agency regeneration rate is a little more than 1-to-1. “When we look at the agency universe today, we see a very healthy marketplace,” Stipe said. According to the IIABA Study, in 2016 there were 38,000 independent agencies in the United States.
In addition, the number of large agency and brokerage firms is growing, while the number of smaller firms remains stable, Stipe said. “In Georgia, for example, about half of the state’s agencies producing $10 million or more in annual revenues didn’t exist 15 years ago. Regeneration will continue to replenish the agency system despite consolidation,” he said.
For further information and commentary, contact Kevin Stipe of Reagan Consulting at 404.869.2532 or [email protected].
About Reagan Consulting: Reagan Consulting is a management consulting firm providing strategic consulting, valuation, and merger-and-acquisition (M&A) services to the independent insurance distribution system. The firm’s services for publicly owned and privately held independent insurance agents and brokers, bank-owned agencies and other participants in the insurance distribution marketplace include: appraisals of fair market value, mergers and acquisitions advisory, ownership perpetuation planning, strategic planning facilitation, key employee compensation and equity plan design, and agency performance benchmarking. Reagan Consulting co-developed the well-known Best Practices Study and produces the quarterly Organic Growth & Profitability benchmark survey.
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