The number of mergers and acquisitions involving insurance producers fell last year according to the “2009 Insurance Brokerage M&A Activity Summary” released by New York-based Hales & Co.
After a record 307 transactions seen in 2008, there were just185 transactions in 2009, a 40% decline. This makes 2009 one of the least active of the decade, and the first year to see the number of M&A deals dip below 200 since 2003, the company reports. Of note, 140 or 76% of all announced transactions in 2009 were for property/casualty agencies compared to 201 or 66% during 2008.
Hales & Co. attributes the inactivity to a variety of factors, including a prolonged soft market for insurers, the overall economic slump, instability in the credit markets as well as uncertainty related to national health care reform.
However, Hales & Co.’s Managing Partner Rob Lieblein predicts the M&A market will change in 2010 and beyond.
“We expect that various economic, market and political dynamics will begin to improve and both buyers and sellers will be more committed to actively engaging in merger and acquisition activity,” Lieblein said. “Overall, we are taking the ‘glass is half full’ approach to the M&A market for 2010.”
Additionally, Lieblein says that all the fundamentals are aligned to jump-start merger and acquisition activity this year. “Demand and supply should both increase as clarity develops around the economy, market and health care reform during 2010,” he says. “The pricing gap should continue to close between buyers and sellers as we believe valuations will increase slightly and sellers will be more realistic in their valuation expectations.”
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