The upward trend of Canadian P&C insurance brokerage merger and acquisition (M&A) activity over the past decade will continue in 2025 despite political uncertainty, advisory firm Smythe LLP says in its Canadian M&A Market Update. 

That said, buyer and market sentiment is shifting, write partners Alex Wong and Gagan Ahluwalia.  

That’s indicated by the 82 transactions publicly announced in 2024 — down from 116 in 2023. Twenty of those deals were announced in Q1, followed by 29 in Q2. 

Activity in the first half of the year was driven by the anticipated increase in capital gains inclusion rates, which are now “not expected to come to fruition,” says Smythe’s report. 

Just 13 deals were announced in 2024 Q3 — the lowest total activity in any quarter since 2021.  

But there were 20 deals publicly announced in 2024 Q4, which parallels the number of deals closed in that same quarter over the last three years. 

“Regardless, we feel the stage is set for continued consolidation in 2025, with acquisition multiples remaining elevated, albeit unevenly distributed across the brokerage spectrum.” 

Related: Why brokerage M&A looked different in 2024

Comparatively, 2023 saw exceptionally high deal counts, which Smythe says is an outlier. The number of transactions in 2024 is “within range or higher than pre-pandemic years.” 

The authors add: “Peaks and valleys are expected going forward; however, demand remains robust for 2025, and as a result, we expect valuations to remain elevated for quality brokerages.” 

 

Notable 2024 trends 

By geography, Ontario and Alberta remain home to the largest share of the country’s M&A activity. Specifically, brokerages in provinces with public auto see weaker demand, except where they can display a strong commercial business or ability to scale.  

“With that being said, we’ve observed increased interest in B.C. as ICBC commissions have recovered to levels prior to the switch to the no-fault model,” Smythe writes.  

By buyer type, private-equity backed consolidators made the most deals (46%) in 2024, followed by insurer or insurer-backed acquirers (30%). Between the two buyer types, that’s 77% of announced deals, down from 80% in 2023 and 81% in 2022.  

PE-backed acquisitions have been trending downward since 2020 (70%). However, the number of deals made by PE-backed acquirers has remained the same, “it’s just that there are more deals being completed by other buyer-types,” says Smythe.  

The PE-backed portion, Smythe estimates, will continue to change, and valuations will be impacted, if brokerages decide to part ways with any M&A focused growth strategies.  

2024 also saw a handful of ‘mega’ or otherwise notable deals: Aon’s acquisition of NFP, which includes its Canadian operations; A.J. Gallagher’s acquisition of Assured Partners; and the merger between Atlantic Canada’s Cal LeGrow and MacLeod Lorway. (Of the latter, Smythe says it expects to see more smaller brokerage merger activity in 2025). 

Related: What’s AI’s role in brokerage M&A?

 

Feature image by iStock.com/VioletaStoimenova