Takeaways from Gallagher’s call on acquiring AssuredPartners
On December 9, Gallagher discussed its acquisition of AssuredPartners . Here are the key highlights:
Acquisition Overview
AJG acquired AssuredPartners for $12.45 billion, benefiting from a $1 billion deferred tax asset to lower costs. AssuredPartners is a US insurance brokerage focused on the middle market and specialty segments. “I have to say our due diligence confirmed that AssuredPartners business and talent are top-notch. They are growing organically through M&A and are operating at attractive margins today. In so many ways, the business is a lot like Gallagher. And to the new 10,900 colleagues that will be joining the Gallagher family of professionals. Let me say right now, you’re going to feel right at home within the Gallagher culture.” – CEO Patrick Gallagher.
Market Position, Revenue and Growth
AssuredPartners, the 11th largest US insurance broker at the end of 2023, placed approximately $11 billion in premiums and contributes $2.9 billion in pro forma trailing 12-month revenue, with $938 million in adjusted EBITDAC, projected to increase to $1.1 billion with $160 million in expected synergies. Most of AssuredPartners’ revenue is US-based, with approximately 60% from retail property and casualty (P/C), 25% from retail benefits, and the remaining 17% from wholesale specialty operations.
Strategic Fit
The acquisition enhances AJG’s position in the middle market, expands specialty offerings, and aligns with its entrepreneurial sales-based culture. This acquisition aims to enhance Gallagher’s US middle-market P&C and employee benefits focus, strengthen niche capabilities in areas like transportation and healthcare, support wholesale reinsurance and claims management, and expand its tuck-in M&A strategy within a compatible entrepreneurial culture. “In our view, the commercial middle market is the most attractive segment. Clients here tend to be growing and have complex insurance and human capital needs that demand expert advice from a trusted adviser.” – Gallagher.
M&A
Over the past three years, AssuredPartners has achieved 6% annual organic growth, grown total revenue by 19% annually through acquisitions, and maintained profit margins of 30% or more. It has completed approximately 500 acquisitions, including over 200 since 2020, at valuation multiples similar to Gallagher’s tuck-in deals. “They have a really strong M&A team, and thus, we think will add to our M&A capabilities and capacity over the short, intermediate and long term.” – Gallagher.
Product Mix
AssuredPartners generates $2.4 billion in retail revenue, mainly from US commercial P&C and employee benefits, with the rest from international property casualty. It has 12 niche practice groups, including agriculture, aerospace, and transportation, which will enhance Gallagher’s US retail business. Wholesale specialty contributes $500 million, with half from risk pool administration (RPA), 40% from programs and MGA/MGU operations, and the rest from brokerage and binding. The deal strengthens Gallagher’s RPA focus on public entities and schools, while expanding into well-established MGA/MGU programs.
Integration
Gallagher expects to spend approximately $500 million over three years on integration, with one-third allocated to non-cash stock retention awards and two-thirds for operational integration. Key expenses include migrating agency management systems, general ledgers, HR systems, and consolidating other systems. Additional costs will cover hardware, real estate, and IT-related projects.
Cultural Alignment
“Gallagher in the United States probably has to hire 5,000 people a year just to keep up with our turnover at the present state that we’re in now. So with this addition of these people, we’re getting a great group of people that look just like Gallagher about 12 years ago.” – Gallagher.
Brand Transition
The AssuredPartners brand will be discontinued.
