A lot of things were put on hold during the early stages of the coronavirus pandemic, mergers and acquisitions in private equity included, but there is always an exception to the rule. Insurance brokerages may seem uninspiring compared to in-the-news sectors like software-as-a-service (SaaS) and healthcare, but PE interest in insurance brokerages has been growing at a record pace over the past year.
The uptick in deal activity surrounding insurance brokerages can be attributed to many factors including the structure of the industry. But when Falcon looked at the data, some surprising features of the current deal boom jumped out.
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Insurance Brokerages Ripe for Consolidation
The sheer volume of business makes the insurance industry ripe for M&A activity. There are more than 30,000 insurance brokerages in the United States according to propertycasualty60.com, and many of these businesses are family owned and operated. In this situation, the founding members often look for a return on their investment upon retirement and invite buyers in to evaluate the business. During the pandemic in 2020, insurance broker M&A increased markedly.
The decision to sell on the part of smaller brokerages during the pandemic may have been motivated by a lack of technology expertise and the sophistication for tech implementation that the work-from-home movement required. The immediate need to upgr...