Arthur J. Gallagher Expands Service Offering With Buyout

Arthur J. Gallagher & Co. (NYSE:AJG) has acquired Preston-Patterson Co., Inc. The acquisition will help the company enhance its portfolio of offering. The terms of the deal have been kept under wraps.

Founded in 1947, Conshohocken, PA-based Preston-Patterson Co. is a retail property and casualty insurance broker. The company caters to broadcasters and media clients across the United States. This apart, the company caters to the demand of commercial clients and personal lines of clients, with focus on coastal property exposures along the Atlantic Seaboard. Addition of Preston-Patterson Co. will thus add capabilities to Arthur J. Gallagher’s array of insurance brokerage services for broadcasters and media clients.

Arthur J. Gallagher evolved from a small retail presence in Australia, Canada and New Zealand to one of the top five brokers. The company acquired 459 entities through 2002 and 2017. In the first nine months of 2018, the company closed 27 buyouts, with annualized revenues of about $234 million. This Zacks Rank #2 (Buy) insurance broker has also been expanding outside the United States as evident from its last few buyouts. Its inorganic pipeline remains strong with about $500 million of revenues. A solid capital position has been aiding the company to pursue mergers.

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Given the insurance industry’s all-time high capital level, insurers are pursuing mergers and acquisitions to ramp up growth, expand footprint, enhance capabilities, and diversify operations. In fact, M&A activity has been one of the key trends in 2018.

Shares of Arthur J. Gallagher have rallied 14.4% year to date, outperforming the industry’s increase of 7.4%. The company’s expansion policy to ramp up its growth and a strong capital position should continue to drive shares higher.

Other Integrations in the Insurance Space

Recently, Brown & Brown, Inc.’s (NYSE:BRO) subsidiary, Brown & Brown of Kentucky, Inc., acquired Dealer Associates, Inc. to ramp up its dealer services team in Southwest. Arch Capital Group Ltd (NASDAQ:ACGL) acquired McNeil & Co. to boost its underwriting business. In the last month, Marsh & McLennan Companies, Inc.'s (NYSE:MMC) unit Mercer acquired investment consulting, alternatives consulting, and wealth management operations of Pavilion Financial Corporation to provide wider and deeper global research, and specialist resources to its consultants and clients.

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