The booming agent and broker merger and acquisition frenzy of 2006-2008 has given way to a slower time, a Reagan Consulting report finds.

Robert Reagan

“The slowdown in deals is simply not as a bad as some headlines would have us believe,” says CEO Robert Reagan in a statement. “While we’ve seen a retreat in the factors that propelled the three-year increase in activity and values, other fundamental drivers are solidly in place. There may be fewer transactions and more selectivity among buyers, but there are still ample opportunities for buyers and sellers.”

Selling prices have fallen with the recession, leading some older agency owners to struggle with the decision of whether to sell for a lower price or hang on, a decision made even harder when investments that would have supported the owner have also taken a financial hit.

Today’s market is fragmented, but benefits from scale, according to the report.

Increased agent and broker M&A activity and value during 2006-2008 was driven by three primary factors. First, public brokers, the most active buying group, enjoyed strong market valuations during a soft commercial property-casualty market, according to Reagan. Second, equity capital and low borrowing costs made leveraged acquisitions an attractive means of generating high investor returns and, third, banks were continuing their acquisitive entry and expansion into the insurance distribution space.

A steady supply of agencies to buy is available, but matching buyer and seller is taking more time. A seller may need to look at more buyers and less-traditional buyers to find the perfect strategic and financial fit, says the report.

“Buyers and sellers are more deliberate and cautious today than they were one or two years ago,” Reagan said “And the conservation of capital and various uncertainties are causing some restraint in M&A activity.”

The Reagan report points to four uncertainties that are dampening deal-making in the current marketplace: the economic recession; political uncertainty concerning healthcare reform and capital gains taxes; the continued soft market; and the weakened performance of agencies.

“We know that times are tough, but we remain optimistic about the future of our industry,” Reagan said. “Opportunities still abound for those that are capable of seizing them.”

To read IFAwebnews.com’s two-part series on agency values, click here for part one and click here for part two.