By Arasu Kannagi Basil
(Reuters) -Insurance broker Brown & Brown (NYSE:BRO) will buy rival Accession Risk Management in a $9.83 billion cash-and-stock deal, the companies said on Tuesday, adding to a string of mega-mergers in recent years as industry players look to consolidate.
While small buyouts are typical in the highly fragmented industry, the deal highlights that companies are willing to pay top dollar for acquisitions that significantly enhance their market presence or strengthen their competitive edge.
Last year, Aon (NYSE:AON) acquired NFP for $13 billion, while Marsh McLennan (NYSE:MMC) bought McGriff Insurance Services for $7.75 billion. Arthur J. Gallagher’s $13.45 billion deal for AssuredPartners is expected to close later this year.
Despite economic uncertainties dampening overall dealmaking activity, some firms are cautiously moving forward with their acquisition plans, driven by long-term priorities.
Boston, Massachusetts-based Accession is the parent of Risk Strategies, which was founded in 1997 by insurance industry veteran Mike Christian. It also houses insurance wholesaler One80 Intermediaries.
Both companies connect insurers with customers and have a diverse client base, including commercial firms and nonprofit organizations.
Brown & Brown expects to fund the acquisition through a $4 billion equity raise and issuance of $4 billion of bonds across multiple tenors. Its stock dipped 0.6% in early trading.
MIDDLE-MARKET PUSH
The deal is expected to add heft to Brown & Brown’s property and casualty, and employee benefit insurance businesses, while bolstering its footing in the middle-market segment.
This segment caters to companies smaller than multinational corporations but larger than typical small businesses.
Accession, which has more than 5,000 insurance professionals throughout the U.S. and Canada, operates mainly in the middle-market segment and has completed over 190 acquisitions.
The group reported pro forma adjusted revenue of $1.7 billion and placed $15.7 billion in premiums in 2024.
Brown & Brown CEO Powell Brown told analysts that the acquisition would be a "major" step in its journey to the next intermediate goal of $8 billion and beyond in revenue.
Over the years, acquisitions have helped the Florida-based company grow from about $300 million in revenue in 2000 to nearly $5 billion last year, he said.
The two companies, according to Brown, do not have a "significant" amount of concentration or overlap in any single area.
About $1.3 billion of Brown & Brown stock will be issued to selling shareholders, with about $250 million going to private equity firm Kelso, which acquired a majority stake in Risk Strategies from buyout firm Kohlberg in 2015.
Under the deal, which is expected to close in the third quarter of 2025, Brown & Brown will combine its programs and wholesale brokerage segments into a new specialty distribution segment.
BofA Securities, J.P. Morgan Securities and Skadden, Arps, Slate, Meagher & Flom advised Brown & Brown on the transaction.