The largest deal ever for one of the insurance brokerage sector's most active acquirers highlights a recent increase in M&A activity for Brown & Brown Inc. and some of its publicly traded peers.

With the Oct. 22 announcement of an agreement to acquire Hays Companies for $705 million in cash and stock, Brown & Brown has positioned itself to acquire companies responsible for upwards of $300 million in estimated annualized revenues to date in 2018, more than it had done in the previous four full calendar years combined. The announcement of the acquisition of the No. 22 broker of U.S. business, according to Business Insurance, comes one month after Marsh & McLennan Cos. Inc. agreed to acquire London-based Jardine Lloyd Thompson Group PLC, which in addition to its strength in the United Kingdom and Australia, placed as the No. 16 broker of U.S. business.

Private equity-backed acquirers have emerged as the dominant force in consolidating the broker/agency space in recent years. That will remain the case in 2018; they have been involved in approximately 46% of the more than 400 U.S. broker/agency transactions covered by S&P Global Market Intelligence this year. While that is down slightly from the 2017 peak, it is well above historical levels. Just 10 years ago, private equity was involved in fewer than 11% of such announced transactions.

Publicly traded buyers, meanwhile, account for a little more than 15% of the year-to-date announcements. That's up slightly from the 2017 floor, but still well below the decade-ago contribution of nearly 53% of the activity in the sector. By contrast, the four most-active private equity-backed acquirers, Hellman & Friedman LLC-backed Hub International Ltd., ABRY Partners LLC-backed Acrisure LLC, Apax Partners LLP-supported AssuredPartners Inc. and Genstar Capital LLC's Alera Group Inc., have combined to account for nearly one-quarter of the year-to-date U.S. broker/agency deals.

Still, Brown & Brown's third-quarter tally of 10 deal completions compares quite favorably to the three transactions it closed in the year-ago period. Management at Arthur J. Gallagher & Co., another traditionally active broker/agency consolidator in the public realm, offered especially upbeat anecdotal commentary about prospects for additional acquisitions during a September investor meeting.

"I have to say I don't know in my history with the company if we've ever had a more robust or better or deeper pipeline," Arthur J. Gallagher Chairman, President and CEO J. Patrick Gallagher, a 44-year veteran of the insurance industry, said in his remarks. "It's really incredible what's out there."

Fragmentation has long served as a key driver of inorganic growth prospects for insurance brokers, and Gallagher said that the industry remains "vast" with no shortage of opportunities for tuck-in acquisitions.

S&P Global Market Intelligence has covered 418 acquisitions of U.S.-based insurance brokerages, agencies, and/or their assets already in 2018, which will mark the fourth consecutive year that deal volume has topped 400 transactions. Speakers during the recent Insurance M&A Symposium suggested that reaching or surpassing the 2017 total of more than 500 transactions is not out of the question.

Publicly traded brokers often point to perceived cultural advantages, staying power across economic cycles and opportunities to participate in long-term incentive plans as opposed to price alone when competing with private equity-backed buyers for transactions. Gallagher, for his part, said his company has been able to maintain relative pricing at a "pretty reasonable" level.

Conventional wisdom suggests that rising interest rates may ultimately lead private equity-backed brokers to change their buying patterns, but Brown & Brown CEO J. Powell Brown during an Oct. 23 call said he has not yet seen evidence of that.

And lest industry participants assume that the large Hays acquisition will sideline Brown & Brown from its more routine M&A activities, the CEO provided assurance that his company remains on the prowl for deals that fit culturally and make sense financially.

"No one on this call or anyone out there should think ... we're slowing down," Brown said.