Gallagher to ramp up M&As after buying AssuredPartners for $13.45bn

Arthur J. Gallagher’s all-cash $13.45bn deal to buy AssuredPartners will add $2.9bn in annual revenue and 10,900 staff to the brokerage and allow it to make more acquisitions in the future, said the firm’s top executive. The deal will consolidate Gallagher’s position as the world’s third-largest insurance brokerage, expand its presence in the US middle market for P&C insurance and employee benefits, and add some specialty and international insurance business. On a pro forma basis, Gallagher’s annual revenue will grow to $14bn. The purchase price reflects net consideration of $12.45bn and a $1bn deferred tax asset. AssuredPartners – the 11th largest brokerage of US business with $2.49bn in 2023 revenue – reported $2.9bn in annualised revenue in the first nine months of this year and $938m in earnings before interest, taxes, depreciation, amortisation and coronavirus (EBITDAC), a standard measure of brokerage profitability. Gallagher has also announced a $8.5bn stock offering to help fund the deal. The acquisition is expected to close in the first quarter of 2025. The price reflects a 14.3 times EBITDAC multiple. That is lower than the 22 times EBITDAC that Aon paid for NFP Corp and the 21 times EBITDAC that Marsh McLennan paid for McGriff Insurance Services earlier this year, according to a note by Wells Fargo Securities. But it is higher than the 10-11 times multiples that are generally being paid for “bolt-on” acquisitions, “which is not surprising as larger deals go for higher multiples”, the note says. The valuation also reflects the fact that Gallagher is already a large middle market broker, and the purchase of AssuredPartners is not a strategic move into another market sector, said Timothy J. Cunningham, managing principal at Optis Partners in Chicago. “It was very well priced compared to other large deals that a number of other brokers have done,” said Meyer Shields, Baltimore-based managing director at Keefe, Bruyette & Woods. With other large brokers recently making significant middle-market purchases, there are fewer buyers in the market, and a slowdown in P&C rate increases may also have lowered the price, he said. On a conference call with analysts Monday, Gallagher said it expects to see about $160m in revenue synergies, real estate and other savings. But J. Patrick Gallagher, chairman and CEO, said savings are “not coming from laying a lot of people off”. A Gallagher spokesman said in an email: “We expect all AssuredPartners employees to transition to Gallagher.” Gallagher estimates total integration costs will be about $500m over five years. The brokerage plans to make about $200m in retention awards to AssuredPartners’ staff. Assured Partners was founded in 2011 by former Brown & Brown executive Jim Henderson. It is headquartered in Orlando, Florida, and has about 400 offices in the US, UK and Ireland. Its revenue mix is 59% retail P&C, 24% retail employee benefits and 17% wholesale and specialty, according to a Gallagher presentation. It reported 6.7% organic growth in the third quarter. The company has acquired about 500 other brokerages since it was founded, including 200 since 2020, and offers the potential for Gallagher to accelerate its acquisition programme, said the latter’s CEO. Most of AssuredPartners’ deals were locally sourced without a competitive process, and Gallagher did not “get a look” at 94% of the AssuredPartners deals, Gallagher said. In the future, the combined mergers and acquisitions team of the two brokerages could put together more than 100 deals a year, compared with the 50 to 60 that Gallagher currently completes, he said. Gallagher has made hundreds of acquisitions over the past four decades, including significant acquisitions such as the 2021 deal to buy WTW’s reinsurance business. The five-year ownership span GTCR LLC, which was the founding investor in AssuredPartners in 2011 and re-acquired a majority stake in 2019, was normal for private equity firms, which usually raise money in ten-year funds, said Dave Donnini, managing director, head of business and consumer services, at the company. GTCR will no longer have any insurance brokerage holdings, he said. “We tend to do one platform at a time in a given industry, especially an acquisitive platform, so they’re not competing with each other,” Donnini said. GTCR likes the insurance brokerage business, and “if the right opportunity comes along at some point down the road”, may consider reinvesting in the sector, he added. This article first appeared on our sister website Business Insurance. For further news from Business Insurance, please click here.

Gallagher to ramp up M&As after buying AssuredPartners for $13.45bn

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