Arthur J. Gallagher & Co.’s all-cash $13.45 billion deal to acquire Assured Partners will increase the brokerage firm’s annual revenue by $2.9 billion, add 10,900 staff and support future could make further acquisitions, Gallagher’s chief executive said on Monday.
The partnership strengthens Gallagher’s position as the world’s third-largest insurance brokerage, expands its presence in the U.S. middle market for property and casualty insurance and employee benefits, and expands its presence in the U.S. middle market for property and casualty insurance and employee benefits, as well as expanding its presence in certain specialty insurance and international insurance businesses. will be added.
On a pro forma basis, Gallagher’s annual revenue would increase to $14 billion.
Gallagher said the purchase price reflects net consideration of $12.45 billion and a deferred tax asset of $1 billion. AssuredPartners, ranked 11th among U.S. business intermediaries with $2.49 billion in 2023 revenue, had annualized revenue of $2.9 billion as of Sept. 30, according to Business Insurance’s latest rankings. Earnings before interest, taxes, depreciation, and amortization were reported at $938 million. Coronavirus, a standard measure of profitability for brokerage firms.
Mr. Gallagher also announced on Monday that the company would issue $8.5 billion in stock to help fund the acquisition. The acquisition is expected to close in the first quarter of 2025.
The price reflects an EBITDAC multiple of 14.3x. That’s more than 22 times the EBITDAC that Aon PLC paid for NFP, or 22 times the EBITDAC that Marsh & McLennan Co. paid for McGriff Insurance Services Inc. earlier this year, according to a note issued by Wells Fargo Securities on Monday. This is lower than 21 times EBITDAC. . However, this amount is higher than the 10-11x multiples typically paid for “bolt-on” acquisitions, and “it is not surprising that larger deals will have higher multiples,” the memo said.
Timothy J. Cunningham, managing principal at Optis Partners LLC in Chicago, said the valuation shows Gallagher is already a large middle-market broker and the Assured Partners acquisition is not a strategic move into another market sector. It also reflects the fact that
Meyer Shields, managing director of Keefe, Brouillette & Woods in Baltimore, said: “It was very reasonably priced compared to the large transactions that many other brokers have done.” Ta.
Other major brokerages have recently made large purchases in the mid-market, leaving fewer buyers in the market, and a slowdown in property and casualty insurance rate hikes may also have pushed prices down, he said.
In a conference call with analysts on Monday, Gallagher said he expects revenue synergies and real estate and other savings to be about $160 million, but that the chairman and CEO J. Patrick Gallagher said the savings “will not come from a lot of layoffs.” ”
“We expect all Assured Partners employees to transition to Gallagher,” a Gallagher spokesperson said in an email.
Gallagher estimates total integration costs will be approximately $500 million over five years. The brokerage will pay approximately $200 million in retention incentives to AssuredPartners staff.
Assured Partners was founded in 2011 by former Brown & Brown Inc. executive Jim Henderson. Headquartered in Orlando, Florida, the company has approximately 400 offices in the U.S., U.K., and Ireland, with 59% of its revenue coming from retail real estate and property/casualty insurance and retail employee benefits, according to sources. 24% and wholesale and specialty businesses 17%. Gallagher’s presentation. Organic growth in the third quarter was 6.7%.
The firm has acquired about 500 other brokerages since its founding, including 200 since 2020, and Gallagher said he could accelerate his acquisition program. said.
Most of Assured Partners’ deals are sourced locally without going through a competitive process, and Gallagher said he “doesn’t see” 94% of Assured Partners’ deals.
In the future, the mergers and acquisitions teams at both brokerages could collectively close more than 100 deals a year, but Gallagher currently completes between 50 and 60 deals, he said. Ta.
Mr. Gallagher has made hundreds of acquisitions over the past 40 years, including significant acquisitions such as the 2021 acquisition of Willis Towers Watson PLC’s reinsurance business.
For GTCR LLC, which was a founding investor in AssuredPartners in 2011 and reacquired a majority stake in 2019, the five-year ownership period is normal for a private equity firm that typically raises money in 10-year funds. said Dave Donini. , managing director and head of business and consumer services at Chicago-based GTCR.
As a result of the sale, GTCR, which was a founding investor in Alliant Services, will no longer own any shares in the insurance brokerage company, he said.
“We tend to run one platform at a time in a given industry, especially acquisitive platforms, so we don’t compete with each other,” Donini said.
GTCR likes the insurance brokerage business and may consider reinvesting there “if the right opportunity presents itself at some point in the future,” he said.
