Over the past decade, mergers and acquisitions (M&A) in the insurance brokerage industry have been making headlines. In 2023, there were 555 announced transactions, marking a 44% decline from the 977 deals in 2021. While this drop may seem significant, it only scratches the surface of the M&A landscape. The market remains strong, with over 60 active acquirers and independent agents navigating their growth strategies.
Navigating the Evolving M&A Landscape: Opportunities and Considerations for Independent Insurance Brokers
Despite a slowdown in transaction volume, interest in acquisitions has not waned. Interest rates have stabilized, buyers have adjusted their capital structures, and investments in technology and integration are on the rise. Meanwhile, more than 35,000 independent insurance brokers are considering their next steps — whether to grow internally or explore external sales.
As history has shown, private equity firms do not remain passive in the market — there are either buyers or sellers. This sentiment reinforces the idea that valuations are on the rise across all revenue categories, making agency owners rethink their perpetuation strategies.
With valuations at record highs and the potential for interest rate cuts, M&A activity is expected to accelerate. Many agency owners, particularly those in their late 50s, are contemplating retirement and financial diversification. However, remaining independent can be highly rewarding. If an agency grows at 15% annually, it will double in size within five years. Achieving this level of growth, however, requires commitment and investment.
The Strategic Shift: Selling In for Long-Term Growth and Profitability
Third-party sales often bring increased profitability by standardizing producer compensation, reducing non-recurring expenses, and leveraging synergies in HR, payroll, and IT. Many of today’s active acquirers were once independent owners who realized that partnering with like-minded professionals could be both profitable and less risky.
As the industry consolidates, independent agents are shifting their mindset from selling out to selling in. With many buyers offering equity instead of all-cash deals, agency owners must carefully evaluate their options. By focusing on organic growth and sound fundamentals, agencies can retain the flexibility to choose the best path for their future.
AAI sets you up with the tools your agency needs to thrive. Contact us for more information on starting an independent insurance agency.