Arthur J. Gallagher (AJG) Acquires Horn, Boosts Consulting Arm
Arthur J. Gallagher & Co. AJG recently announced the acquisition of A.H. Horn and Associates Limited.The terms of the transaction are not revealed yet.
Ontario-based Horn is a training and consulting agency that provides consulting services as well as leadership development and sales programs to its clients.
The addition of this entity to the acquirer’s portfolio is a strategic fit as it will enhance its existing growth opportunities in the consulting space.
Inorganic Growth Story
AJG seeks acquisition opportunities that align with its business objectives and allows it to enter new markets, strengthen its service offerings and increase its global footprint. Historically, AJG has successfully utilized strategic acquisitions to enhance its competitive position and drive growth. As the company continues to pursue strategic acquisitions, it strengthens its position as a leading global insurance brokerage and risk management firm.
Arthur J. Gallagher has an impressive inorganic story with several buyouts in Brokerage and Risk Management segments. This insurance broker acquired 15 entities in the second quarter of 2023, contributing about $349 million to estimated annualized revenues. AJG has a strong merger and acquisition pipeline with about $700 million of revenues, associated with about 55 term sheets either agreed upon or being prepared.
AJG’s revenues are geographically diversified with strong domestic and international operations, contributing about 67% to total revenues. The company expects an increase in international contribution to total revenues, given the number and size of non-U.S. acquisitions, along with acquisitions taking place domestically.
A solid capital position supports this insurance broker in its growth initiatives, and it thus remains focused on continuing its tuck-in mergers and acquisitions. The company expects an M&A capacity of more than $3 billion through the end of 2023.
Price Performance
Shares of this Zacks Rank #3 (Hold) insurance broker have gained 17.3% in the past year outperforming the industry’s growth of 7.1%. The insurer’s efforts to ramp up its growth profile and capital position should continue to drive the share price.
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Another Acquisition in the Same Space
Given the insurance industry’s adequate capital level, other players like Marsh & McLennan Companies, Inc. MMC have pursued strategic mergers and acquisitions.
Marsh & McLennan’s business Mercer recently acquired a Human Resources technology advisory firm, Leapgen. The acquisition is expected to enrich Mercer’s solutions for Workforce and HR Transformation, improve technology decision-making, and provide better employee experience outcomes.
Acquisitions are part of the core growth strategies of the company. MMC made numerous purchases within its different operating units, enabling it to enter various geographical regions, expand within the existing ones, foray into new businesses, develop segments and specialize within its existing businesses. Marsh & McLennan’s shares have gained 10% in the past year.
Stocks to Consider
Some better-ranked stocks from the Brokerage Insurance space are Brown & Brown, Inc. BRO and Ryan Specialty Holdings, Inc. RYAN. Brown & Brown and Ryan Specialty presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Brown & Brown 2023 and 2024 earnings per share (EPS) is pegged at $2.69 and $2.94, indicating a year-over-year increase of 18% and 9.3%, respectively. In the year-to-date period, BRO has gained 14.9%.
BRO beat estimates in three of the last four quarters and missed once, the average being 4%.
Ryan Specialty has a decent track record of beating earnings estimates in two of the last four quarters, meeting once and missing the other time, the average being 2.4%. In the year-to-date period, RYAN has gained 6.5%.
The Zacks Consensus Estimate for Ryan Specialty 2023 and 2024 EPS is pegged at $1.39 and $1.68, indicating a year-over-year increase of 20.9% for each year.
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