Insurance Brokers (MMC, AON, AJG, WTW, BRO)

[valueventures]

https://cdn.hl.com/pdf/2024/q2-2024-insurance-brokerage-market-update.pdf

[dealraker]

34 minutes ago, valueventures said:

https://cdn.hl.com/pdf/2024/q2-2024-insurance-brokerage-market-update.pdf

Certainly gives clarity as to how aggressive AJG is towards acquisitions.  

[dwy000]

@longterminvestor, what are your thoughts on AJG buying Woodruff Sawyer?  Paying $1.2bn plus $150m in acquisition costs and retention bonuses seems crazy expensive for a company with $88m of EBITDAC.  Is this indicative of valuations or is Woodruff a one off at this value?

[longterminvestor]

The valuations paid on basic metrics for Woodruff Sawyer, as eye popping as they look, are less than what AJG paid for Assured Partners (AP).  AP is 3X the size of Woodruff rev wise tho.  The AP transaction plays a part because AJG raised cash by selling stock to pay $13.45B for AP.  AJG exercised an "over allotment" clause in the stock offering and received an extra $1.28B in early Jan '25.  

 

Either the purchase of Woodruff was all part of the plan or the amounts curiously align and AJG had an extra $1.2B laying around burning a hole in their pocket to buy Woodruff - either way - Insurance Brokerage acquisition valuations have been and continue to stay high.  There are other notable transactions where the valuations were richer than AP & Woodruff.  For example, AON paid $13.4B for NFP's $2.2B revenue in 2024 - worked out to 15X EBITDA.  AJG paid 14.3X and 13.6X (rough math) for AP & Woodruff respectively.  

 

There are 40+ REAL buyers of insurance brokers - all competing to acquire revenue from a seller.  That's a recipe for elevated multiples.  Its unlike anything I have seen in other sectors - fascinating to watch.

[Spekulatius]

On 3/5/2025 at 2:13 PM, longterminvestor said:

The valuations paid on basic metrics for Woodruff Sawyer, as eye popping as they look, are less than what AJG paid for Assured Partners (AP).  AP is 3X the size of Woodruff rev wise tho.  The AP transaction plays a part because AJG raised cash by selling stock to pay $13.45B for AP.  AJG exercised an "over allotment" clause in the stock offering and received an extra $1.28B in early Jan '25.  

 

Either the purchase of Woodruff was all part of the plan or the amounts curiously align and AJG had an extra $1.2B laying around burning a hole in their pocket to buy Woodruff - either way - Insurance Brokerage acquisition valuations have been and continue to stay high.  There are other notable transactions where the valuations were richer than AP & Woodruff.  For example, AON paid $13.4B for NFP's $2.2B revenue in 2024 - worked out to 15X EBITDA.  AJG paid 14.3X and 13.6X (rough math) for AP & Woodruff respectively.  

 

There are 40+ REAL buyers of insurance brokers - all competing to acquire revenue from a seller.  That's a recipe for elevated multiples.  Its unlike anything I have seen in other sectors - fascinating to watch.

It is still noteworthy what AJG paid because just ~1.5 years ago, they mentioned they plan to pay 10-11x EBITDA for acquisitions. So there is valuation creep going on.

 

Maybe they meant small bolt ons, because larger acquisitions for sure aren’t available at these 10-11 x multiples.