Broker Consolidation Shifts from Deal-Making to Integration in Softening Market

The Shift from Deal-Making to Integration

The insurance brokerage sector has undergone significant consolidation over the past 15 years, with many private-equity-backed brokerages growing aggressively through acquisitions. However, this approach is shifting as the market softens, and brokerages are now focusing on integrating acquired firms and finding organic growth.

According to industry executives, the days of acquiring a business and leaving it to operate independently are over. Instead, brokerages are now looking to integrate acquired firms through centralized agency management systems, insurer relationships, and a common brand.

This shift is driven by the need for brokerages to adapt to changing market conditions and invest in technology to remain competitive. As technology spending increases, smaller independent brokers may be forced to seek larger partners, further driving consolidation in the sector.

Behind the Shift: Industry Executives Weigh In

Behind the Shift: Industry Executives Weigh In

John Wepler, chairman and CEO of MarshBerry, notes that the thesis of 'acquiring a business and leaving it to operate independently' is changing. He believes that the shift has contributed to a 'great migration' of brokerage talent as producers and executives leave consolidators for other brokers or to establish new firms.

EPIC Insurance Brokers & Consultants' CEO Steve Denton agrees, stating that the days of acquiring a business and not integrating it are gone. He notes that technology now allows EPIC to handle small-commercial books more efficiently and integrate additional volume into its existing platform.

Phil Trem, president of MarshBerry, highlights the importance of organic growth in determining brokerage valuations. He notes that while top-performing brokers can still generate double-digit organic growth, average growth is falling, widening the valuation gap between high-performing and average firms.

What Brokerages Need to Do Next

What Brokerages Need to Do Next

In order to remain competitive, brokerages need to adapt to changing market conditions and invest in technology. This may involve integrating acquired firms, finding organic growth, and investing in digital transformation.

Smaller independent brokers may need to seek larger partners to remain competitive, and brokerages should be prepared to discuss a sale if they are unable to adapt to changing market conditions.

Brokerages should also focus on building a strong brand and creating a common foundation that allows them to provide more services and resources to clients.