Slow down reported in European insurance M&A deal volumes
1 June 2022
The lingering impact of the COVID-19 pandemic and the ongoing war in Ukraine have been pinpointed as reasons for a slowdown in in European insurance M&A deal volumes compared to the same period 12 months ago.
There are also concerns about rising European interest rates and debt financing becoming more expensive. Many countries are facing inflation threats with the Bank of England raising the base rate for the third time in four months in March, and the European Central Bank (ECB)and Swiss National Bank (SNB) set to follow suit.
New market research by FTI Consulting suggests the backlog of transactions that completed in Q1 2021 had been delayed during 2020 due to lockdowns and economic uncertainty. As restriction were lifted, it helped maintain M&A volumes throughout 2021.
UK insurance assets were put up for sale in advance of an anticipated increase in capital gains in March 2021 last year which did not happen and the sharp rise in UK transaction volumes accounted for most of the peak European M&A activity in Q1 2021.
The FTI report noted: “Announcement volumes in Q1 2022 notched higher than Q4 2021 at 106 (vs 101) deals despite high valuation multiples, indicating a continuation of strong M&A appetite and activity across the European insurance market. Small company acquisitions as part of roll-up consolidation strategies constitute the majority of deal volumes – however, the continent has also witnessed some notable strategic M&A transactions, as buyers look to grow footprint in new markets and strengthen capabilities.”
European M&A Deals in Q1, 2022 included :
· Germany, Austria, Switzerland (DACH) witnessed a continuation of strong deal announcements, with 13 transactions in the period, broadly in line with the 12 announced in Q1 2020 and Q1 2021.
· At six reported transaction announcements, Q1 2022’s overall M&A volume in CEE remained steady and was in line with Q1 2020 and Q1 2021.
· Insurance M&A volumes in France remained steady, with nine deals signed and announced in Q1 2022.
· Benelux experienced a marked reduction in signed and announced M&A deals, from 11 in Q1 2021 to four in Q1 2022.
· Italy experienced a spike in M&A activity relative to the corresponding period last year, with nine signed deals announced in Q1 2022.
· In Q1 2022, there were eight announced acquisitions in the Iberia region. Insurance distribution has driven most of the deal activity in the region
· The Nordics region saw an increase in deal volume, with seven announced transactions in Q1 2022 vs three in Q1 2021;
According to FTI Consulting, demand for insurance distribution businesses by international broker consolidators across the continent has underpinned the transaction volumes, with Howden, GRP, Sakra and MRH Trowe all strengthening their market position with several acquisitions in the region.
US-based buyers also continue to acquire in Europe to expand their footprint and take advantage of niche insurance markets.