PwC on midyear M&A: ‘Consolidation of consolidators’

While there has been a dip in deal volume for the first half of the year, sustained interest in insurance and a “unique” surge in megadeals reflect a trend of “the consolidation of consolidators,” according to Mark Friedman, lead, U.S. insurance deals practice, PwC.

He spoke with InsuranceNewsNet on the heels of PwC releasing its US Deals 2025 Midyear Outlook report.

“Brokerage is still very attractive. I would say, historically, the buyers of those were private equity. We’ve seen a bit more focus in some of the larger strategics looking to grow or accelerate their growth trajectory by doing megadeals. But if you include the one announced [recently], which is not included in the publication, you have four of the five largest public brokers having announced megadeals in excess of $5 billion, which is a bit unique,” Friedman said.

He explained that brokers likely saw an opportunity to act, with the cost of funds for private equities having increased over the last few years and interest rates reaching a favorable point. This presented an opportunity for them to start buying larger assets that had been private-equity backed.

“That’s an iteration of a trend that we’ve been talking about for years now in the consolidation of the brokerage space. This is more consolidation of the consolidators. And, if you notice, deal volumes are down — there were less small deals in the six-month period — but a lot more bigger deals. So, it’s a bit of a catch up, if you will,” Friedman said.

Factors impacting activity, consolidation

Friedman suggested that one of the main reasons why deal volume has lulled somewhat is because “when the consolidators are consolidating, a lot of their attention is not focused on doing some of those smaller deals.”

“I think that could contribute somewhat to it. The other thing is, a lot of brokers are PE-backed and highly levered, and with rates where they are, it’s put a bit of a strain. So, insurance brokers have been spending a lot of time looking at their back office functions and trying to figure out ways to extract costs,” he added.

As such, while there is still interest and benefits of scale, Friedman said brokers have generally been “focused on other things” other than acquisition and consolidation while hoping rates will come down and the cost of financing will go up.

“As deals start to get announced with healthy valuations, a couple of IPOs announced, we’re starting to see more insurance companies look internally at their businesses and assess whether there are businesses that are subscale, non-core or that we could get a better return for our shareholders or investors by selling versus holding and continuing to invest in those businesses,” he said.

More interest in P&C

Despite the overall lull in activity, PwC noted sustained strategic interest in P&C driven by record-high profitability.

“With rates up where they are now, and coupled with a pretty strong rate market, just given inflation and some of the losses insurance companies took over the last couple of years, we’re seeing record profitability on the P&C insurance side. That’s piqued the interest of investors… So, we’re now seeing, I’d say, firing at all cylinders,” Friedman said.

He said brokers and MGAs continue to be “very hot,” and life and annuity continue to be strong, although the structure of those deals has shifted somewhat.

“There’s a lot more alternative capital vehicles coming into play versus straight buyouts of platforms or operating companies, and that’s where capital is getting deployed. And now we’re starting to see a fair amount of interest on the PNC side, and that’s driving deal activity,” Friedman said.

Projections

Looking forward, PwC expects to see broker M&A activity take off in terms of both size and scale, putting pressure on those who have not done deals yet.

“If you’re not growing in this environment, you’re essentially contracting because everyone else is growing at a much more rapid pace. We saw that there was a deal announced last week that was almost out of necessity because these brokers are all very mindful of their positioning in the market,” Friedman said.

In his view, no one will restrict acquisitions but rather the next tier of brokers looking to potentially be sold will start focusing more attention on some of the corporate strategic buyers and private equity investors that have historically acquired them.

At the same time, Friedman said he expects to see a fair amount of IPO activity, including “at least a couple” in 2026, as a “high-quality, sizable” backlog already exists and brokers are simply waiting for favorable market conditions.

“The IPO markets have been sporadic. We’ve seen a couple of IPOs, particularly in the insurance sector. But I think brokers with such high valuations are waiting for the market to really come back… I do expect to see a significant increase in uptick in IPO activity once the markets come back,” Friedman said.

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