2024 Update: Transactions of Specialty Firms Plummet While Valuation Soars

Video Transcription

Hello, my name is George Bucur. I’m the Managing Director and Co-Head of MarshBerry’s Specialty Practice. Serving Specialty Distributors such as MGAs, MGUs, wholesale brokers, and cover holders, we’re here today to present the overall summary of the valuation environment for 2024 and what we might expect going into 2025. However, before we get into valuations, I want to talk a little bit about MarshBerry’s experience to provide some context around our breadth of understanding and how we can knowledgeably speak to what we will in this session.

First, MarshBerry has been the number one sell side advisor for over the last 25 years within the insurance distribution segment overall. Specific to specialty organizations, we’ve been the number one advisor for the last seven years. Since 2020, we have completed 71 sell side assignments of delegated authority and wholesale brokers and in 2024, we completed 16 of those mandates. Again, I provide this context because it provides validity to what we will be talking about later in the session.

Let’s talk about the overall transaction experience in terms of number of transactions that we’ve had in 2024. To set the base, unlike in 2021 through 2023, which saw historical highs in terms of the number of transactions. 2024 was a very different story. We expect valuation transactions to be down by about a third in 2024. We’re still finalizing those numbers; we’ll have a subsequent video on that topic later in the year. However, even in the face of much lower transaction numbers, we continue to see interest in specialty sellers. But what we don’t see are the numbers of sellers. In other words, it’s a lack of supply. As a result of the lack of supply, valuations have gone up over 25 percent, in terms of multiples, from 2023 to 2024. The median transaction multiple, all in, that MarshBerry experienced in 2023 was just over 13 times. The equivalent multiple for 2024 was over 16 times, representing that 25 percent increase. Also, very notably, the overall spread of deal multiples that MarshBerry has received on deals that we closed, was over 11 times. Meaning on the low end, it might have been around 9 times pro forma EBITDA, and on the upper end was over 20 times in regard to what we’re able to obtain.

Why is this relevant? It’s relevant because buyers, while still a high level of demand, are being more discerning in regard to valuations and deal structures. This is important for any potential seller to understand in the marketplace because one, it depends on the potential buyers that you’re talking with, in terms of how they structure deals. But two, it’s important for you to understand what you need to do to drive value within your organization. These are all attributes and characteristics that MarshBerry works with our clients on on a daily basis to help our clients maximize their value.

If you have questions around what you can do to maximize the value of your organization, we encourage you to reach out. Until next time, be well.