Reflections on Arthur J. Gallagher's Acquisition of Assured Partners
At the end of 2024 Arthur J. Gallagher, the third largest insurance broker in the world, announced plans to acquire Assured Partners, a PE-backed P&C and benefits brokerage. The deal is set to be the largest in industry history. AJG, with its reported ~$10B in top line as of 2023, will acquire roughly $2.9B of TTM revenue. The transaction underscores an ongoing wave of industry consolidation, but also paves the way for further deal activity in the upper market. Since the DOJ blocked AON’s bid for WTW in 2021, regulatory scrutiny seemed to freeze upper market M&A, and consolidation has remained concentrated throughout the middle market. However, the recent AJG acquisition suggests renewed momentum, alongside AON’s acquisition of NFP earlier in April of 2024. With a more relaxed, pro-business regulatory posture likely to take hold under the Trump administration, it seems likely that in 2025 we will see more megadeals within the sector.
Within the past decade, insurance brokerages have been caught in a wave of consolidation. A total of 6,918 insurance agency acquisitions were recorded in the 10 year period between 2014 - 2023. Though high interest rates slowed the pace of M&A post its 2021 peak, overall activity remains elevated. Insurance brokerages have positioned themselves as ideal candidates for roll-up and tuck-in acquisition strategies due to the highly fragmented nature of the business. The top three brokers (Marsh, Aon, AJG) still only control 9% of market share.1 Brokerage aggregations are attractive in their ability to unlock potential cost synergies through centralized operations in the back office and policy servicing functions.2 For buyers deploying leverage, brokerages position themselves as strong debt financing candidates with their recurring commission revenue and relatively inelastic demand.
Private equity backed aggregator platforms have been the biggest driver of industry consolidation. Acrisure is the most active and serves as a worthy case study. Founded in 2003 by Greg Williams and Ricky Norris as a Midwest focused brokerage, the company later attracted PE backing and has grown inorganically into a $4B revenue (and $1B in EBITDA) business.3 In the five year period of 2018-2023, the company acquired a reported 572 agencies, representing the largest share of deal volume in the industry. Acrisure positions itself as an “Agency Partner”, meaning owners benefit from attachment to the Acrisure platform. Structurally, they sell their book in exchange for equity upside in Acrisure, but generally continue to operate. In operating, agencies maintain a large degree of autonomy and platform benefits are offered on an opt-in basis. The potential benefits include back office functions and servicing support, which can lower expenses. But what is most interesting is the ability to leverage the Acrisure platform for expansion and growth, through exploiting access to a broader array of carrier appointments, more favorable commissions from carriers and a known brand that might offer credibility when winning new business.
Buyers With 20 or More Deals in 2023
The Assured Partners acquisition is a tremendous milestone for AJG, being a large, attractive asset that can move the needle at a reasonable net purchase multiple. The acquisition will serve to further diversify AJG’s US footprint and enrich some of its niche industry practice groups. AJG will also benefit from the M&A team of AP, which is well experienced and has proprietary access to inorganic growth opportunities through its network of relationships. AJG reported only having access to 6% of the deals where AP transacted. AJG intends to pay $13.45M gross consideration, or $12.45M net consideration after a $1B deferred tax asset. With AP reporting $2.9B in TTM revenue as of September 30, 2024, the offer represents a 14.3x gross consideration EBITDAC multiple, or a 11.3x net consideration EBITDAC multiple, inclusive of estimated synergies. The firm is using a mix of debt issuance, short-term borrowing, cash on hand and an $8.5B underwritten public offering of common equity to finance the transaction. It is expected to be 10 - 12% accretive to the 12-month adjusted earnings. The deal will unlock $160M of synergies, $60M of which will come from commission rate adequacy, premium finance and internal wholesale use, with the rest coming from synergies expected in using the Gallagher Center of Excellence. The firm estimates to spend over $500M to ensure a successful implementation.
For private equity backers of Assured Partners, the transaction will be among the most celebrated exits in the sector. The firm was founded in 2011 by GCTR, a PE firm based in Chicago, in partnership with insurance veteran Jim Henderson. Since it has grown to $2.9B in revenue, representing a 45% revenue CAGR over the past 13 years. A big part of the growth story has been through a disciplined M&A strategy, having completed 214 acquisitions since 2020. It further speaks to the value capture potential of a broker aggregator platform within the middle market, and will likely further invigorate investor interest.
The deal appears to be a moment of meaningful value creation for the insurance industry. For AJG, it further solidifies its position as a leading global player. For AP and its PE backers, it speaks to the success of a disciplined M&A strategy. More broadly, it may signal an ongoing shift towards larger scale consolidation as regulatory attitudes changes after years of overreach. The gates are opening and likely will continue to open for megadeals.
IBISWorld. (2024). Insurance Brokers & Agencies in the US - Market Research Report (2014–2029). https://www.ibisworld.com/united-states/industry/insurance-brokers-agencies/1331/
Skadden. (2023). How and Why Private Capital Continues To Invest in the Insurance Sector. https://www.skadden.com/insights/publications/2023/06/quarterly-insights/how-and-why-private-capital-continues-to-invest
Equal Ventures. (2024). Acrisure 2.0: Insurance agency GBO. https://newsletter.equal.vc/p/acrisure-20-insurance-agency-gbo
AM Best. (2024). Top global insurance brokers. https://bestsreview.ambest.com/edition/2024/july/Top-Global-Insurance-Brokers.html
Optis Partners. (2024). North American Agent & Broker 2023 Year-End Merger & Acquisition Report. https://optisins.com/wp/2024/01/2023-ma-report/
Aruthur J. Gallagher & Co. (2024). Arthur J. Gallagher & Co. Signs Agreement to Acquire AssuredPartners. https://investor.ajg.com/news/news-details/2024/Arthur-J.-Gallagher--Co.-Signs-Agreement-to-Acquire-AssuredPartners/