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2021 Agent and Broker Mergers and Acquisitions

Posted on January 20, 2022

Mergers and acquisitions among insurance agencies and brokers in the U.S. and Canada set all-time record in 2021.

The North American Agent & Broker 2021 Year-end Merger & Acquisition Report prepared by Optis Partners shows 1,034 transactions in the U.S. and Canada in 2021 as compared to 795 transactions in 2020.

The report anticipates that robust agency M&A will continue in 2022 but will likely be off from the 2021 record. Although concerns regarding a capital gain tax increase have declined, an aging seller population and increased private equity and other purchasers suggest that M&A activity in 2022 will remain very active.

Agency and broker purchase transactions are generally structured as asset purchases. The asset purchase structure allows the buyer to acquire the core operating assets and exclude the owner’s non-operating assets, e.g., automobiles, art and real estate.

Pricing is generally a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization), which has been adjusted to reflect the normalized earnings anticipated by the buyer. The payment terms generally include a cash payment (and in some instances an equity interest in the buyer) at closing and an earn-out payment. The upfront payment typically approximates 85% of the transaction value and the earn-out component (achieved if EBITDA meets certain growth targets) is generally payable over a one to three year period. The owner-producers will be expected to enter into employment agreements and non-solicitation and non-competition agreements.

Planning for agency succession is an ongoing process. With private equity and other buyers continuing purchasing activity, that planning should include consideration of a sale to a third party.

Knox Law has a history of representing both agent and broker buyers and sellers, and would be happy to work with you. Contact us to learn more:

David M.Mosier

David M. Mosier

David M. Mosier's practice includes business and tax transactions, retirement benefits, designing and drafting of employee pension and welfare benefit plans, and more.



William B.Helbling

William B. Helbling

William B. Helbling concentrates his practice in the areas of business and tax law, mergers and acquisitions, banking and commercial lending, nonprofit and tax-exempt entities, and intellectual property & technology.



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