Brown & Brown Inc. President and CEO J. Powell Brown, responding to an analyst's question about the potential pursuit of a transformational acquisition, said Jan. 24 that his company tries to position itself to look at transactions of "all sizes and shapes."
"We focus on trying to find ones that fit culturally and make sense financially, and so whether that's something that's a little bit larger or continues to be a little bit smaller, we are open to looking at all of them assuming they make sense," Brown said, speaking during a conference call to discuss fourth-quarter 2016 results.
The question arose after published reports recently said that Onex Corp. was seeking a buyer for USI Insurance Services LLC approximately four years after the private equity firm acquired a majority stake in the company.
"If you just look at the top 20 insurance brokers in the United States ... I believe six of them are backed by private equity," Brown said without mentioning the companies by name. "So if you just think about it just very simply, in the next three to five years, all of those will try to be sold."
Brown said he is unsure about the manner in which private equity firms will opt to pursue sales of those companies.
"Does that mean they go public?" he asked, noting that "most of the structures at present are not set up to be a public company" and that to do so would require certain changes. Or, he continued, "Would they be acquired either by another PE firm or by a strategic acquirer?"
The same analyst who queried about transformational deals also asked about the role of larger brokers in the middle-market space. Brown, in response, surmised that the question related to the Marsh & McLennan Agency business of Marsh & McLennan Cos. Inc.
"They have their own strategy, whatever that is, relative to their middle-market play," he said.
More broadly, Brown observed that he believes the acquisition marketplace "continues to be fully priced" as evidenced by the expectations of some sellers "outpacing reality."
He reported that Brown & Brown made acquisitions that represented more than $55 million in annualized revenues in 2016, in line with 2015 levels.
"I would tell you that I'm comfortable with that because we didn't find ones that fit culturally and made sense financially," Brown said. "We found a couple that fit culturally last year, but financially would not have made sense, and that's not our plan."