Q3 Activity Contributes to All-Time High in European Insurance M&A Despite Fewer Transactions, According to FTI Consulting Report
London, 22 November 2022 — European insurance M&A deals for 2022 continue to run at an all-time high of 292, compared to 280 in Q1-Q3 2021 and 190 during the same period in 2020, as investors pursue opportunities to deploy unspent capital despite geopolitical tensions, economic turmoil and the rising cost of debt financing, according to analysis by FTI Consulting, Inc. (NYSE: FCN). This is even though insurance M&A transactions across Europe declined slightly in the third quarter of 2022 to 76, compared to 78 during the same period in 2021.
“Despite challenging market conditions and macroeconomic uncertainties, insurance intermediaries continue to face competitive auction processes and valuation multiples remain elevated, demonstrating the resilience of this sector,” said André Frazão, Associate Partner in the Global Insurance Services practice at FTI Consulting.
The European Insurance M&A Barometer: Q3 2022 Update shows financial sponsors maintained a strong appetite for distribution and service deals. There were 39 acquisitions by private equity-backed portfolio companies and 12 directly by private equity funds during the reporting period. U.S.-based PE firms and bidders backed 10 acquisitions in Q3, taking the year-to-date total for this group to 38, suggesting that a strong dollar may encourage further U.S. takeovers.
Most of the acquisitions were made by private equity-backed broker consolidators, who announced 37 transactions during Q3, compared to 35 in the same period the prior year.
The UK and Ireland continued to lead the European insurance M&A market, accounting for 40% of the total number of deals in Q3 2022, whereas the Germany, Austria and Switzerland (“DACH”), France and Iberia regions saw the greatest increase in deal activity during the reporting period. The acquisition of distribution and service providers drove deal volumes in the DACH region — the area with the highest increase — where transactions jumped to 18 in Q3 2022, compared to eight in the previous quarter and 12 in Q3 2021. Despite noteworthy transactions, such as Cinven’s purchase of Nordic broker consolidator Säkra, deal activity decreased in Benelux and the Nordics relative to previous years. Meanwhile, the ongoing geopolitical crisis in Central and Eastern Europe is likely to have contributed to the slowdown in deal activity in this region.
Mr. Frazão added, “With the ongoing inflation threat, rising interest rates could present a headwind to the buyouts market, with debt financing becoming more expensive, suggesting that valuations and deal activity may decrease in the coming quarters.”
For more, download the FTI Consulting European Insurance M&A Barometer: Q3 2022 Update.
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Source: FTI Consulting, Inc.