Arthur J. Gallagher & Co. still expects its purchase of AssuredPartners Inc. to close later this year, even though antitrust regulators are taking a close look at the proposed deal.
The $13.45 billion transaction is one of the largest in the insurance broker space, CEO J. Patrick Gallagher said during a March 20 investor call, so it makes sense that regulators want to examine it.
"We were surprised because ... this doesn't really impact market share," Gallagher said, adding that he does not see it as anticompetitive when comparing the two companies' books of business. "But it does make some sense [given the size of the deal] that a regulator would say, 'I want to look at this.'"
The comments came following a disclosure earlier this month that Gallagher had received a request for additional information on the deal from the US Department of Justice. Gallagher has pushed the transaction closing date back to the second half of this year.
The broker company has already received Hart-Scott-Rodino approval for its $1.2 billion acquisition of Woodruff-Sawyer & Co. Inc., announced earlier this month, according to CFO Douglas Howell.
An unusual inquiry
While the deal still seems likely to get regulatory approval, it is surprising it received much attention according to Piper Sandler analyst Paul Newsome.
"There have been other deals that are bigger, and nobody really thought anything about them, so I think this inquest took [Gallagher] by surprise," Newsome said in an interview. "There's nothing structurally about AssuredPartners that makes this deal stick out."
Brokers are not frequently the subject of antitrust merger concerns, Newsome said, with the notable exception of the once-planned $30 billion Aon PLC/Willis Towers Watson PLC merger that the Department of Justice successfully halted in 2021.
"There are some very large brokers and carriers but there's no real dominant carrier in virtually any line of insurance," Newsome said. "So this news ... came out of left field and took investors by surprise."
AssuredPartners is a typical acquisition for Gallagher; Newsome does not expect the deal to fall through, but it remains to be seen whether the regulatory scrutiny is a bellwether. While the DOJ and Federal Trade Commission under President Joe Biden were seen as rather aggressive with antitrust efforts, it may still be too early in President Donald Trump's term to know whether that will change.
