Broker M&A valuations continue to rise in 2023: MarshBerry

Valuations in the brokerage mergers and acquisitions market continued to rise in 2023 even amid macroeconomic headwinds, according to a report Monday from MarshBerry Inc.

The average total purchase price potential for maximum earnout for all firms was up 7.8% to 14.85 times earnings before interest, taxes, depreciation and amortization, compared with 13.78 times earnings in 2022.

Valuations for “platform” firms, which involve a high-level transaction for a buyer, typically due to new geography niche, expertise, size, or talent, are even higher. So-called “platform” deals traded at 18.68 times earnings before interest, taxes, depreciation, and amortization, up 14.3% from 2022’s 16.35.

“Despite this nearly two-year stretch of less-than-optimal economic conditions — valuations for average insurance brokers and platform firms are at all-time highs,” the report said.

While the deal count fell slightly last year to 807, off 10.6% from 2022, 2023 was the third most active year on record and a “solid” year for insurance brokerage M&A, according to the report.

Organic growth, though off slightly, remains robust, the report notes, as brokers continue to benefit from rising premium rates.

Average organic growth for brokers was 8.9% in the last 12-month period ended Sept. 30, 2023, down slightly from 9.3% for full-year 2022, MarshBerry said.

Public brokers averaged 11.2% organic growth, topping the 9.7% growth in 2022 and 10.7% growth in 2021.