M&A Growth in 2017
The first half of 2017 saw robust growth of M&A activity.
Deal value more than tripled to $10 billion, compared to $2.9 billion in the first half of 2016, according to PrincewaterhouseCoopers Corporate Finance LLC’s “U.S. Insurance Deals insights 1H 2017.”
“When you think about the insurance industry, you have to remember there are a lot of smaller deals happening without announced deal values. There is a lot of activity that occurs behind the scenes,” said John Marra, U.S. Insurance Deals Leader and Global FS Deals partner of PwC.
“There’s a lot of capital out there looking for opportunity in the insurance industry, and it’s a slow, sometimes complex process to get deals announced and completed,” he said. “There was a little bit of a pause last year, at the end of 2016 — third and fourth quarter — and due to the success of closed deals in the prior year or two, more deals came out at the start of this year.”
“The brokerage trend continues, as big players are investing where they can. Based on what we saw [in the first half of the year], I think the main question is ‘Who’s going to come to market?’” — John Marra, U.S. Insurance Deals Leader and Global FS Deals partner of PwC
A total of 249 insurance deals were announced in the first half. Insurance broker deals were most active at 90 percent of deal volume, reported PwC.
The largest deal announced in the first half of the year was the acquisition of insurance broker USI by an investor group, including private equity firm KKR and Canadian pension fund CDPQ, for $4.3 billion.
“The brokerage trend continues, as big players are investing where they can. Based on what we saw [in the first half of the year], I think the main question is ‘Who’s going to come to market?’” Marra said.
“A number of players came to the market at the end of last year. It got others asking, ‘should we be an acquirer?’ ‘Should we be acquired?’ These are key decisions being made,” he said.
Among the key M&A trends, the life sector led the market in deal volume, while property/casualty contributed most to deal value.
“New capital continues to drive annuity and life business. The P&C side is a little different — premium and profitability growth are hard to come by,” said Marra, “so opportunities remain for small- to medium-size companies to build much-needed scale through consolidation.”
In the life and annuity sector, opportunities exist for insurers to exit capital-intensive or non-core businesses with plenty of investor interest in closed blocks and a narrower product concentration.
PwC predicts a healthy appetite for deals to continue through the second half of the year. One such example is Oak Hill Capital Partners, a private equity firm, acquiring The Carlyle Group’s Stake in EPIC Insurance Brokers & Consultants. EPIC is a retail P&C insurance brokerage and employee benefits consultant valued at $977 million.
The acquisition will give Oak Hill a controlling equity position in EPIC and enable EPIC to continue its organic growth strategy. The investment is expected to close in the third quarter of 2017, another example of a continued robust market. &