Canadian insurance brokerage M&A activity has been steadily increasing for the past decade, and 2023 is shaping up to be another record-setting year. This article will delve into the key trends, observations, and notable transactions that have defined brokerage M&A in 2023.
As of the end of October 2023, there have been 88 publicly announced insurance brokerage transactions (including life and group health brokerages acquired by P&C consolidators), with 72 of them focused on property and casualty targets. This trend represents at least a continuation of the uptick in activity in this space since 2020, with 74 publicly announced deals in 2022 and 64 in 2021.
The pace of M&A deals slowed in the transition from late 2022 to Q1 of 2023. We attribute this slowdown to acquirers adapting to the new “higher for longer” interest-rate environment, especially those heavily leveraged. Since then, the number of closed deals in Q2 and Q3 of 2023 has surpassed any previous quarter since 2018. We expect the number of transactions will continue to rise as acquirer appetite remains robust, and the number of brokerage owners looking to exit their business due to retirement considerations is increasing.
The provinces of Ontario and Alberta represent the largest proportion of M&A activity in Canada. The demand for retail brokerages in provinces with public auto insurance remains weaker, with exceptions made for brokerages with a strong commercial book of business or scale.
Private equity-backed consolidators have continued to dominate M&A activity, being responsible for 59% of acquisitions thus far in 2023. While insurer-backed acquisition activity surged in 2022, PE-backed firms remain the driving force behind consolidation over the past decade.
Several high-profile transactions have marked 2023, including the Ontario Teachers’ Pension Plan’s investment in Westland Insurance Group Ltd. via Broadstreet Partners, Madison Dearborn Partners’ follow-on investment in Navacord Corp., Leonard Green & Partners, L.P.’s investment in Hub International Limited (with an enterprise value of $23 billion), and Definity’s acquisition of Drayden Insurance (with an enterprise value of $208 million). Several of these transactions were to bolster balance sheets to enter a new phase of acquisition activity.
We’ve observed the following trends based on the 10+ transactions we’ve been involved with this year:
If you have any inquiries or require further information regarding brokerage mergers and acquisitions or valuation matters, please don’t hesitate to reach out.