Analysis of 2024 Brokerage M&A Trends Reveals Insights into Future Developments

The Canadian property and casualty (P&C) insurance brokerage sector has been witnessing a consistent upward trend in merger and acquisition (M&A) activity over the past decade, and according to advisory firm Smythe LLP, this trend is expected to continue in 2025, despite some political uncertainty. In their Canadian M&A Market Update, partners Alex Wong and Gagan Ahluwalia note that while the number of transactions publicly announced in 2024 was slightly lower than in 2023, with 82 deals announced compared to 116 the previous year, the sentiment among buyers and the market is evolving.

The first half of 2024 saw 49 deals being announced, driven by expectations of an increase in capital gains inclusion rates, which ultimately did not materialize. However, the third quarter of 2024 witnessed a noticeable decrease in M&A activity, with only 13 deals announced, the lowest quarterly total since 2021. Nevertheless, the fourth quarter of the same year saw a resurgence, with 20 deals being publicly announced, aligning with the average number of deals closed in that quarter over the past three years.

Looking ahead to 2025, Smythe LLP remains optimistic about the prospects for further consolidation in the industry, with acquisition multiples expected to remain high, albeit varying across different segments of the brokerage spectrum. The authors emphasize that despite some fluctuations in deal counts, demand for acquisitions remains strong, indicating that valuations for quality brokerages are likely to remain elevated.

In terms of regional trends, the provinces of Ontario and Alberta continue to dominate the M&A landscape in Canada, with brokerages in provinces with public auto seeing weaker demand unless they have a robust commercial business or scale potential. Notably, there has been an increased interest in British Columbia, attributed to the recovery of ICBC commissions to pre-no-fault model levels.

Private-equity backed consolidators were the most active buyer type in 2024, accounting for 46% of announced deals, followed by insurer or insurer-backed acquirers at 30%. While private-equity-backed acquisitions have been declining since 2020, Smythe LLP highlights that the number of deals completed by this group has remained consistent, indicating a broader diversification of buyer types in the market.

The year 2024 also witnessed several significant M&A transactions, including Aon’s acquisition of NFP, A.J. Gallagher’s acquisition of Assured Partners, and the merger between Cal LeGrow and MacLeod Lorway in Atlantic Canada. Smythe LLP anticipates a rise in smaller brokerage mergers in 2025 following this trend. Overall, the evolving landscape of the Canadian P&C insurance brokerage market suggests a dynamic and competitive environment for M&A activity in the coming years.