The number of private equity-backed competitors has “quadrupled”
Private equity has transformed the mergers & acquisitions (M&A) environment among insurance agencies and brokerages, with one agency owner saying the number of private equity-backed competitors buying up firms has “quadrupled” over the past decade.
“I think the buyer might be a little different now,” said PointeNorth Insurance Group CEO, principal, and president Bill Skeeles (pictured).
“The banks got out of buying retail insurance agencies several years ago, and while the publicly traded brokers are still very active, there’s a lot of continued activity with some of the bigger private equity-funded deals.
“We had about 10 competitors that were private equity funded 10 years ago. A year ago, it was probably about 40, so it had quadrupled in 10 years.”
The impact of private equity on independent agencies
PointeNorth, one of the largest locally owned and operated independent insurance agencies in the Southeast, is looking to expand its transportation insurance operations further through partnerships this year.
“There’s thousands of insurance agencies in the United States that operate independently, and the value on these is so much greater than it was 20 years ago,” he said.
Driven by the surge in private equity, buyers snapped up healthy middle-sized agencies, Skeeles said. The activity led to many agency owners rethinking their succession plans.
“Many of these agency owners thought they were going to perpetuate internally and sell to other people in the agency or to family members,” he said. “But then they realized the value of their agency.”
To stand out in the buyer’s market, PointeNorth positioned itself with a hybrid acquisition model that Skeeles said made it an attractive option for experienced producers seeking additional support and experience while still wanting to maintain their independence.
“We can let [owners] realize the value of their agency while, at the same time, pass on some equity to the people they originally wanted to perpetuate [their agency] to internally,” he said.
“Not many of the big firms today provide equity to producers, especially some of the younger people in their firms, which makes us a little bit unique.”
Expanding in the middle-market commercial space
PointeNorth, one of the largest locally owned and operated independent insurance agencies in the Southeast, is looking to expand its transportation insurance operations further through partnerships in 2024.
The group has grown to 15 locations throughout Georgia, Alabama, and South Carolina and was formed through the partnership of outstanding agencies throughout the Southeast. It focuses most of its business on middle-market commercial lines.
Skeeles told Insurance Business that the group is eyeing an office in eastern Tennessee to support continued growth in the region.
“Our agency is about 73% retail insurance, meaning your general commercialized middle market commercial lines of a small amount of personal lines insurance, a small amount of benefits, and then just under 20% of our revenues are in trucking,” he said.
“We may get into the North Florida or southeast Tennessee a little bit in the future, but right now, there’s plenty for us to do in Georgia and Alabama.”
PointeNorth recently bolstered its newly consolidated transportation program by acquiring Georgia-based Cooper Insurance & Associates in August 2023.
Cooper Insurance, which provides liability, physical damage, cargo, workers’ compensation, and general liability coverage for the transportation industry, is the latest addition to PointeNorth’s portfolio of around 50 firms over 20 years. The agency serves accounts in Alabama, Georgia, Florida, Tennessee, North Carolina, and South Carolina.
“This is probably our most productive year in a long time, as far as the number of acquisitions,” Skeeles said following the deal.
PointeNorth’s combination of local community touch with big-broker resources makes it a significant draw to independent agencies, according to Skeeles.
“We’ve grown to be a firm that has all the resources of a large agency or broker but still operates in the communities like local independent insurance agencies,” he said. “We still have the flavor of a local firm that I think attracts the people that want to join us.”
What are your thoughts on private equity’s impact on agency M&A? Share them in the comments.
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