Acrisure LLC bought the most insurance agencies in the U.S. and Canada last year, easily outpacing the number of deals by other acquirers in a consolidating industry.
The Caledonia-based Acrisure closed 56 transactions in 2015, a year that saw more insurance agencies and brokers sold than in any year since 2000, according to Optis Partners, a Chicago investment banking and consulting firm that tracks M&A in the insurance industry.
The volume of deals that Acrisure closed in 2015 grew the company to 137 offices in 24 states, said CEO Greg Williams. He views last year’s deal volume as sustainable this year.
“We have a very healthy pipeline of activity for 2016,” Williams wrote in an email to MiBiz.
Williams was named a Dealmaker of the Year in the 2015 MiBiz M&A Deals and Dealmakers of the Year Awards.
Backed by San Francisco-based private equity firm Genstar Capital LLC, Acrisure has been on a buying spree the last few years. The company closed 25 acquisitions in 2014 and generally buys independent insurance agencies with a successful track record and a healthy profit margin. Typically, the owners want to grow the business and will stay on to manage the local operations.
Founded by Williams in 2005, Acrisure grew steadily for a number of years through acquisitions in Michigan, Indiana and Illinois. The company’s rapid growth started in 2013 when Acrisure, supported with an infusion of capital from Genstar, began pursuing an aggressive, national M&A strategy.
Acrisure has since become a top 15 insurance broker in the nation. The company last year more than doubled revenues from the prior year to a pro forma $450 million, Williams said.
“Acrisure has obviously found their niche,” said Daniel Menzer, a partner at Optis Partners.
A semi-annual report issued by Optis Partners supports the view for continued high deal volume across the U.S. and Canada this year after M&A activity reached a record level in 2015 with 451 reported transactions. That’s a 26-percent increase from the previous record of 357 reported transactions in 2014 for insurance agencies and brokers.
The top 10 buyers accounted for 251 transactions.
2015 was the second straight year for higher deal volume in the U.S. and Canada following a decline that began in the latter half of 2013. Since then, “several economic factors triggered a robust rebound that has continued ever since,” as more buyers were attracted to the market, including private equity investors who are “dramatically increasing their presence in the marketplace,” according to the Optis report.
“These factors, which have whetted the appetite of private-equity backed buyers, likely will continue to shape the M&A market for at least the near-term, absent an unforeseen market-changing event.”
Buyers such as Acrisure that are backed by private equity are the leading acquirers, accounting for 242 of the 451 reported transactions in 2015, according to Optis Partners. Of the top 10 most-active buyers in 2015, which included a tie for the 10th spot, nine are backed by private equity. The other two are publicly traded corporations.
Private equity buyers who are flush with capital have been drawn to the industry to pursue higher returns as low interest rates and a volatile stock market persist, resulting in more competition for deals.
“There’s a lot of money out there and it needs to be put to work,” Menzer said. “The demand side continues to be very strong.”
As private equity gets more involved, more owners of insurance agencies or brokers are willing to sell as they reach retirement age, Menzer said. Some of them are motivated to sell by valuations that are “as high as they’ve ever been,” he said.
The confluence of factors has nudged up deal multiples to seven or eight times earnings before income taxes, depreciation and amortization (EBITDA), and to 10 times EBITDA for a strong deal. Deals historically go for six to eight times EBITDA and for nine times EBITDA for a strong deal, Menzer said.