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Today's Viewpoint: A MarshBerry Publication

Through August 31, 2021, MarshBerry has observed the most significant year in terms of deal activity yet. Activity is being driven by seller concerns over potential federal capital gains rate changes and the broader investment community pushing to find investments in the insurance industry. Buyer demand picked up last summer after the initial slowdown caused by COVID-19.

There have been 425 publicly announced merger & acquisition (M&A) transactions in the U.S so far in 2021. Total announced transactions in the U.S. have increased by 15.5% compared to this time last year. The gap between 2021 and 2020 is anticipated to widen as deal activity reaches its hottest point in the fourth quarter.

Private capital backed buyers accounted for 308 of the 425 transactions (72.5%) through August, while independent firms have held steady at 14.4% of the total deal count. Deal activity in each buyer category has remained proportional to what has been observed over the last three years.

Integrity Marketing Group LLC, Peter C. Foy & Associates Insurance Services, Inc., and BroadStreet Partners, Inc. are the top three most active buyers in the U.S. in 2021 – totaling a combined 20.5% of the 425 total transactions. The top 10 most active buyers completed 213 of the 425 announced transactions (50.1% of total).

While speculation around increases to capital gains tax remains one of the largest drivers of the increased deal activity, deal activity is anticipated to continue into 2022 as more brokers continue to execute on their acquisition strategies and independent brokers capitalize on expanded resources and the competitive marketplace. Additionally, there will likely be a number of transactions targeting a year-end completion that could slip into 2022 as many professional service providers (e.g. accounting firms, law firms, tax specialists, etc.) are backlogged given enhanced M&A activity across all industries.

Potential tax changes continue to be a big question mark as we get closer to year end. It is expected that Congress will begin arm-wrestling over potential tax increases to pay for the infrastructure bill and other initiatives included in the multi-trillion dollar 10-year spending initiative. On September 13, 2021, Ways & Means announced their tax proposal that is targeting the top marginal rate on individuals, the top corporate tax rate, and potential changes to capital gains. It remains to be seen if all potential changes can be pushed through, but the proposal is causing a lot of discussion across the industry. Nothing is definitive yet, but all eyes will be on Congress over the next few weeks and months to better understand the ramifications of these changes.

Regardless of what happens with taxes, it’s not likely that this will be a feast and eventual famine in deal activity. High demand will continue to be a key driver to ongoing transactions.

A few notable recent transactions that MarshBerry served as the sell side financial advisor include:

  • September 2: Marsh McLennan Agency LLC announced its acquisition of Vaaler Insurance, Inc., (Vaaler) one of the largest independent agencies in North Dakota. A third-generation family-owned business, Vaaler provides business insurance, employee health benefits, and personal lines solutions with expertise in the construction, education, and healthcare industries.
  • September 8: BRP Group, Inc. (BRP) announced it signed a definitive agreement to acquire substantially all of the assets of White Hill Plaza, Inc. (operating as K&S Insurance Agency, “K&S”). Based in Dallas, TX, K&S is a full-service benefit and risk management solutions insurance agency for a wide range of industries and clients. With annual revenue of approximately $19.7M, K&S represents BRP’s eleventh announced partnership in 2021.
  • September 13: BRP announced it signed a definitive agreement to acquire substantially all of the assets of Jacobson, Goldfarb & Scott, Inc. (JGS). Based in Holmdel, NJ, JGS is a specialty insurance broker and managing general agent primarily focused on providing commercial insurance services to middle-market clients across the country. With annual revenue of approximately $43.3M, JGS has a keen focus on offering complex and differentiated coverages in the construction and habitational real estate industries.      

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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Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only.  Scorecard year-to-date totals may change from month to month should an acquirer notify MarshBerry or the public of a prior acquisition. 2021 statistics are preliminary and may change in future publications.  Please feel free to send any announcements to M&A@MarshBerry.com.

Source: S&P Global Market Intelligence, Insurance Journal, Business Insurance, and other publicly available sources.

MarshBerry continues to be the #1 sell side advisor in the industry (as ranked by S&P Global). If you’re considering selling your firm, we are the best choice to help you through the complicated process. If you don’t hire MarshBerry, hire a reputable advisor that can help you navigate one of the most important business decisions you will ever make. You will be much better off having an advisor in your corner that knows the industry than trying to do this on your own. 

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