MarshBerry believes 2021 M&A activity has the opportunity to match or exceed volume levels seen in 2020.
Calendar year 2020 ended with a landslide of deals, with 251 announced transactions in the fourth quarter of 2020 alone. This is the first quarter since MarshBerry began tracking data that has observed more than 200 deals. The mad dash to get transactions back on track following the shutdowns due to the pandemic set the tone for 2021, as buyers are reaffirmed in the strength of the industry and sellers are still mindful of potential changes to the country’s federal tax plans in the near future.
As of February 28, 2021, there have been 77 announced merger & acquisition (M&A) transactions in the United States. The 77 transactions announced in 2021 represents a 26% decrease compared to 2020 at this time. However, as stated in previous updates, transactions are announced retroactively, and we expect this gap to tighten as the year progresses.
MarshBerry believes 2021 has the opportunity to match or exceed volume levels seen in 2020. The demand in the industry continues to grow as 2020 performance is trending to show an approximate average of 5% organic growth and profitability (or Earnings Before Interest, Taxes, Depreciation & Amortization) improving by 1%-3% over historic norms. Most of the profit increase is due to a decrease in travel, entertainment and office related expenses. This performance is very enticing to financial investors as they were once again reminded of the resiliency of the industry.
While the data collected for 2021 is still in its beginning stages, the same trends have continued regarding buyer types and their respective shares of the market. Private capital backed buyers have accounted for 50 of the 77 transactions (64.9%) in January, while independent firms made up 24.7% of the total. The number of deals completed by independent agencies and brokerages is anticipated to increase compared to 2020, as spending restrictions ease and as business continues to normalize following the pandemic.
Hub International Limited, Integrity Marketing Group LLC, and High Street Insurance Partners are the top three most active buyers in the U.S. in 2021, contributing a combined 22.1% of the 77 total transactions. The top 10 most active buyers completed 38 of the 77 announced transactions (49.4% of total).
If you have questions about Today’s ViewPoint or would like to learn more about recent M&A activity, please email or call Phil Trem, President - Financial Advisory, at 440.392.6547.
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