Arthur J. Gallagher Boosts Service Portfolio With Buyout

Arthur J. Gallagher & Co. (NYSE:AJG) recently acquired Marchetti, Robertson & Brickell Insurance and Bonding Agency, Inc. to boost its employee benefits brokerage and consulting services. The buyout is likely to help strengthen the insurance broker’s footprint in the Mid-South region of the United States. However, financial details of the transaction were kept under wraps.

Details of the Transaction

Established in 1953, Marchetti, Robertson & Brickwell operates as a retail property/casualty broker and employee benefits consultant/broker, specialized in construction, bonding, transportation and forest product industries. This, in turn, has aided the firm to build a reputation for itself over a significant period of time. The company caters to a wide range of clients across the United States. After the completion of the integration, the company will continue to operate from its current office locations of Ridegland, MS and Kansas City, MO.

Apart from reinforcing the already strong inorganic growth profile of the acquirer, the latest acquisition is anticipated to fortify its presence in the Mid-South region of the United States, pertaining to employee benefits brokerage and consulting services, primarily in the construction and transportation area. Moreover, the transaction complements the acquirer’s culture of giving back to its communities. Hence, the buyout is expected to add substantial value to the insurance broker’s service portfolio.

Arthur J. Gallagher’s prudent M&A activity bears testimony to its inorganic growth strategy. The company remains optimistic about its capability to attract acquisition partners in its typical small tuck-in size at fair prices.

Over the past few years, Arthur J. Gallagher’s impressive growth has been primarily fed by organic sales as well as judicious buyouts and mergers. The company has been focusing on its consolidation pipeline in the retail employee benefits brokerage and wholesale brokerage areas, which remains strong with about $400 million of revenues. Further, driven by the number and size of non-U.S. buyouts, international contribution to the company’s top line is expected to improve.

Zacks Rank and Share Price Movement

Arthur J. Gallagher carries a Zacks Rank #3 (Hold). Shares of the company have rallied 17% in a year’s time, outperforming the industry’s rise of 6.5%. We expect top-line growth, astute acquisitions and a robust capital position to drive the shares higher in the near term.

Other Acquisitions in the Insurance Space

We have noticed insurers choosing the inorganic path to solidify portfolio for a while now. The insurance industry has been grabbing attention of late with a slew of acquisitions on the back of its available capital resource, remaining at an all-time high.

Recently, The Navigators Group, Inc. (NASDAQ:NAVG) closed the buyout of Bracht, Deckers & Mackelbert NV (BDM) as well as its affiliated insurance company, Assurances Continentales – Continentale Verzekeringen NV (ASCO). Also, Brown & Brown, Inc. (NYSE:BRO) purchased essentially all the assets of C & C Risk Services, LLC.

Further, Alleghany Capital Corporation, a wholly-owned subsidiary of Alleghany Corporation (NYSE:Y) , announced that its unit Jazwares, LLC has acquired Russ Berrie and Applause brands.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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