Arthur J Gallagher has 30 to 35 fresh M&A deals in the pipeline representing $300mn of annualized acquired revenues, the company revealed on Thursday evening, as the listed broking giant targets expansive non-organic growth in Q1.
Speaking on an earnings call, CEO Pat Gallagher said he expects the company to have a “very active” year ahead from an M&A perspective, with agency owners keen to sell due to concerns about potential tax changes that could be brought in by the incoming Biden administration.
In Q4, Gallagher completed 10 M&A deals, representing around $100mn in annualized revenues. Early transactions in 2021 include the purchase of UK-based Bollington, a retail broker with 230,000 customers.
Last year broker M&A deal activity hit a record, increasing by 20% to reach 774 transactions on the year, according to data from Optis Partners.
In terms of organic growth, Gallagher’s US P&C retail business grew 4.5% in Q4, while wholesale arm RPS grew 5%, fueled by a 20% rise in open brokerage income as business flooded into the excess and surplus lines market.
Gallagher is also investing heavily in its reinsurance arm, as it looks to take advantage of dislocation in the market caused by M&A at rival broking houses.
CFO Douglas Howell said Gallagher’s reinsurance platform was growing “double digits” at a profit margin in excess of 30%.
“We see terrific opportunities for that business,” he noted.
In the aggregate, global insurance rates rose 8% across the Gallagher portfolio. Wholesale open brokerage accounts commanded the highest rate increases at 15%, the Gallagher CEO told analysts.
Throughout the call, the Gallagher management team emphasized that it is keen to bring in new clients from across the spectrum, from small businesses to major corporations.
Asked if the merger of Aon and Willis Towers Watson was good news for the fourth placed global broker, Gallagher said “there's lots and lots of opportunities”.
“There [are] clients that have never really talked to Gallagher” that the intermediary now “has a shot at [winning]”.
