Panel: Acquisition activity likely to continue despite higher cost of debt

The cost of debt is going up significantly with the rising interest rates, but mergers and acquisitions are likely to continue, a panel agreed Monday at the NAILBA41 Annual Meeting.

"The investments that you have to make to make scale work have got to happen regardless of the economic cycle," said Bryan Adams, CEO of Integrity Marketing Group.

Integrity is one of the most active acquirers in the insurance marketing space. The Dallas-based company announced a new acquisition Monday, adding The Milner Agency, a brokerage general agency located in Athens, Ga. As part of the acquisition, Seixas G. “Chip” Milner, Jr., and Whitner R. Milner, will become partners in Integrity.

Financial terms of the acquisition were not disclosed.

Appearing on the NAILBA panel, Building for Scale, Adams explained that natural business evolution will drive continued M&A activity.

"To give you an example, on our Medicare side, we started investing in technology," he said. "In 2018, we had six people in our technology side and today we've got 650. If you look at where we're going with our Medicare service platform, we started investing tens of millions of dollars in 2018, 2019 and 2020. Covid hits and all of a sudden we have a solution and we can help people enroll through technology and our platform."

Adams was joined on the panel by Scott Perry, chairman and CEO of AmeriLife Group; Bruce Donaldson, CEO of Simplicity Group; Luke Kaplan, president, Executive Life, Benefits & Annuity Brokerage, at Arthur J. Gallagher; and Josh Simpson, managing director at Goldman Sachs.

Acquisition activity has been fierce among independent marketing organizations such as Simplicity, AmeriLife and Integrity. Last week, AmeriLife acquired TruChoice Financial Group and Inforce Solutions in a blockbuster deal with Allianz Life Insurance Co. of North America.

Monday, AmeriLife announced that Insurance Services, a national distributor of Medicare Advantage and Medicare Supplement solutions headquartered in Greensburg, Pa., is joining its team.

"We're building on this point of growing the pie, rather than just fighting over a share of the pie," Perry said. "We want to help our carrier partners, our advisors, grow the pie and come up with new creative ways."

Know what you're getting into

Acquisitions and partnerships are about more than money and financing. Succession plans need to be made and goals need to align and personalities need to mesh. The panel discussed these issues in a lengthy exchange.

It about being disciplined in the approach to M&A, Kaplan said.

"It's not just about the cost of capital," he added. "It's about having a clear criteria of what you're looking to acquire. Gallagher is a large P&C firm, so we have a lot of data to look back on. When we got it wrong is when we tried to get out over our skis and venture into a new business."

Perry offered some final advice to any broker agency owners who might be looking to get out:

"Get clear on what you're looking to accomplish," he warned. "I think addressing how you think about succession, and then evaluating the different opportunities that are available to you because there's more opportunities today in this market, than there probably has ever been to get out."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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