Today's Viewpoint: A MarshBerry Publication

Why 2022 M&A Activity is Off to a Slow Start

Amidst domestic economic challenges and impactful international events, M&A activity in 2022 is off to a slow start. Learn about 2022 M&A activity and why many experts believe there will be a resurgence of M&A transactions in the second half of the year below.

As of February 28, 2022, there have been 51 announced Merger & Acquisition (M&A) transactions in the U.S. Following 2021’s record market activity, M&A activity in 2022 has gotten off to a relatively slow start. It’s likely that the sense of urgency to complete and announce transactions has quelled somewhat, but the pace at which deals are announced will likely ramp back up as the second quarter of 2022 progresses.

Demand is still incredibly strong with buyers adding talent and volume and sellers hoping to find a partnership that can help propel their business while providing additional tools and resources to their existing client base.

In general, the external environment has not had an impact on the marketplace.  The threat of increased taxes, the unrest happening in Europe, and the likely increase in interest rates by the Federal Reserve are all being watched closely but not impacting the behavior of the main buyers.  Activity remains steady and sellers continue to balance their desire for autonomy with the need to improve and hope of capitalizing on what is likely their largest asset. 

MarshBerry will continue to keep a close eye on public broker valuations and the high yield spread to see if either of those could slow down buyer appetite.  While anything is possible, there is still a significant amount of capital pushing its way into the insurance distribution system and likely to thwart any pause or downturn in market activity.  It is important to remember that part of what makes this industry so attractive is the resiliency it shows when times get tough.  Investors have learned through the Great Recession and the recent pandemic in 2020 that the insurance distribution industry can still have strong financial results when the economy gets challenged. 

A Year-to-Date Merger & Acquisition Activity Summary

From a year-to-date activity perspective, Private Capital backed buyers have accounted for 34 of the 51 transactions (66.7%) through February 2022, maintaining the dominant presence in the marketplace that’s been observed over the last five years. Total deals by these buyers have increased at a Compound Annual Growth Rate (CAGR) of 26.9% since 2018. Independent agencies have accounted for 15.7% of the total deal count. As discussed in previous updates, transaction activity from this buyer segment has gradually declined, as a percentage of the overall deal activity, since 2015.

Strong deal activity from the marketplace’s most active acquirers has remained constant to begin 2022. Ten buyers have accounted for 49.0% of all announced transactions observed, while the top three account for 21.6% of the 51 total transactions.

One notable transaction recently announced:

  • March 1: Hub International Limited and Bold Penguin, Inc. announced an agreement to acquire Insureon Holdings, LLC. Insureon is a digital insurance agency that delivers small-business insurance through its online marketplace. As a part of the transaction, Hub will acquire Insureon’s digital insurance agency and brand, while Bold Penguin will acquire its technology platform.

If you have questions about Today’s ViewPoint, or would like to learn more about activity in the M&A marketplace, email or call Phil Trem, President – Financial Advisory, at 440.392.6547.  

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