The president of New York-based insurance broker NFP’s European operation sees dealmaking in the “very hot” Irish market slowing down, even as he continues to buy businesses.
Matt Pawley led NFP into the Republic in 2020 through the purchase of HMP Insurance and Pension Advisors and followed up with three more deals, at a total cost of €45 million. The business has also got two more purchases in the immediate pipeline, including that of a healthcare benefits firm that is due to close imminently, Mr Pawley said.
NFP rebranded HMP about a year ago and said on Tuesday that it is set to change the names of two other acquired firms in the Republic, Aiken Insurances and ReSure Corporate Brokers, by the end of the month. The fourth, financial advisory firm Simon Shirley Advisors, will be rebranded under the NFP banner early next year.
Mr Pawley said there continues to be “some good quality” independent Irish brokers out there that have yet to partake in the rapid consolidation that has swept the industry in recent years. However, he added that the pace and value of deals will fall as the cost of debt on global markets continues to rise, as central banks hike official interest rates to rein in inflation.
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“Volumes and prices will come down a bit. It just has to,” he told The Irish Times. “It’s simple economics.”
The wider Irish market has seen a flurry of broker deals in the past six years as it followed waves of consolidation in the UK and North America. The ultimate backers of most of the purchasing vehicles are private equity firms, attracted to a sector that is fee-based and delivers steady revenues through the economic cycle. This allows buyers to service the debt needed to finance further deals.
NFP is backed by US private equity firms Madison Dearborn and HPS Investment Partners.
While brokers were changing hands about five or six years ago at five to six times earnings before interest, tax, depreciation and amortisation (ebitda), Pawley said that buyers are now paying multiples “well into double digits” for “good-quality brokers in Ireland with any kind of scale and infrastructure”.
This year alone has seen the likes of Arachas, one of the most active dealmakers in the industry, which itself was acquired in 2020 by UK brokerage group Ardonagh, buy Glennon Insurances in Dublin, and global insurance giant Arthur J Gallagher announced its arrival in the Irish market with the purchase of Innovu.
Elsewhere, PIB Group, a UK intermediary that entered the Irish market in 2017 and went on to buy Campion Insurance in 2021, moved earlier this year to buy Limerick-based Sullivan Insurances.
While NFP also has a well-established presence in the UK, Mr Pawley is planning to enter the continental European market in the near term, using the group’s Irish holding company as an acquisition vehicle.
