TRAVERSE CITY — High Street Insurance Partners Inc. now ranks as one of the top acquirers of insurance brokerages in the country.
The Traverse City-based High Street Insurance Partners closed on 20 acquisitions in the first half of 2021, added another in July, and has many more pending with a “very active” deal pipeline, said Founder, Managing Partner and CEO Scott Wick.
Wick expects High Street Insurance to close “in the ballpark” of 50 to 60 acquisitions during all of 2021. The strong deal flow in 2021 is based on outreach and connections the company made since forming three years ago, he said.
“We’re going to have a very busy back half of the year,” Wick told MiBiz. “We’re really excited about what our inorganic pipeline looks like. We have some great partners we’ve been building relationships with for quite some time and a lot of them are coming to fruition.”
The 20 deals that the company closed in the first half ranks High Street Insurance fourth among the top acquirers in North America so far this year, according to data from Chicago-based Optis Partners LLC.
High Street’s most recent deal came in July with the acquisition of the century-old First Security Insurance, a Hickory, N.C.-based agency that sells home, auto, personal and business insurance policies. The acquisition represents the company’s first entry into North Carolina. Terms of the deal were undisclosed.
High Street Insurance Partners now has 64 offices in 13 states. The company recorded 2020 revenue of about $75 million, which Wick expects could triple in 2021.
Detroit-based private equity firm Huron Capital Partners LLC partnered with Wick in June 2018 to form High Street Insurance. Huron Capital in April sold a portion of the business to Boston-based Abry Partners LLC. High Street Insurance management and partnering agencies retained a large share of ownership, and Huron Capital owns a minority stake.
High Street Insurance typically buys agencies and partners with the prior owners who manage the business locally and take a stake in the firm. High Street Insurance targets deals in high-growth states in the eastern U.S. and will soon enter the Texas market with multiple acquisitions, Wick said.
The need for independent insurance agencies to invest in technology has been among the drivers of deals and industry consolidation in recent years, he said.
“It’s difficult to do without having the size,” Wick said. “Your close-knit community insurance agent needs to add more and more tools and resources, and they certainly see what’s happening in the marketplace. That becomes a huge factor.”
‘Torrid’ M&A pace
In ramping up M&A activity this year, High Street Insurance joined Grand Rapids-based Acrisure LLC among the top 10 buyers in North America of independent insurance agencies and brokerages.
Acrisure for years has pursued an aggressive acquisition strategy and regularly tops Optis Partners’ quarterly M&A report. In the first half, Acrisure closed 31 deals, a slower pace than the 108 closed in all of 2020, according to Optis Partners, which tracks M&A in the industry.
One of the 10 largest insurance brokers in the world, Acrisure has acquired 430 agencies since the start of 2017.
Overall, Optis Partners recorded 339 closed acquisitions in North America in the first half of 2021. That compares to 307 in the first six months of 2020 when activity slowed during the early months of the COVID-19 pandemic. This year’s deal total so far is also the highest number of deals going back to at least 2016.
Transactions in the second quarter alone totaled 181, a 38-percent increase from the five-year low of 131 in the same period in 2020.
Optis Partners expects the industry to maintain a “torrid” M&A pace, driven in part by agency and brokerage owners looking to avoid a potential federal tax increase that contributed to “the all-time high number of agencies that sold in late 2020,” according to the firm’s quarterly report.
As well, private equity investors have been increasingly attracted to the industry’s recurring revenue stream and what Wick describes as “the stickiness of the business.”
The industry also remains highly fragmented with “tens of thousands of quality agencies” that provide buyers plenty of opportunity for acquisitions, said Brian Rassel, a partner at Huron Capital. The industry has always shown “resilience through all economic cycles, including COVID-19” that makes it attractive to investors.
“If you are fortunate to be partnered with a fantastic management team, like we were and are with High Street, you can assemble a group of very high quality agencies and have them be supported by central management to spread underwriting specializations, sales and other best practices and the like,” Rassel said.
All of the top 10 acquirers in North America are backed by private equity in some form. Buyers that are supported fully or partially with private equity money accounted for 69 percent of all transactions in the second quarter, and nearly two-thirds in the last 12 months, according to Optis Partners.
Industry M&A deals last year totaled a record 791 transactions, and included the December acquisition of Grand Rapids-based insurance and employee benefits agency Lighthouse Group by Alera Group. A Deerfield, Ill.-based independent insurance firm that has more than 90 locations across the U.S., Alera Group also ranks in the top 10 acquirers in North America.
“In some ways the M&A story is repetitive: an increasing number of private equity-backed buyers with access to large amounts of cheap capital continues to fuel the pace of M&A and valuations at all-time highs,” according to Optis Partners report.