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Arthur J. Gallagher (AJG) Closes Buyout of R.J. Riordan

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Arthur J. Gallagher & Co. AJG recently acquired R.J. Riordan & Co. Terms of the transaction have been kept under wraps.

Oakbrook, IL-based R.J. Riordan is a retail property and casualty broker. It offers a wide array of insurance products and services to clients throughout Chicago and specializes in serving clients in the construction and transportation industries.

We believe, R.J. Riordan is a strategic fit for Arthur J. Gallagher. This recent deal will provide the acquirer with additional competence and more growth opportunities, especially in the construction industry.

Inorganic Growth Story

Acquisitions enable Arthur J. Gallagher to expand into desirable geographic locations, extend its presence in retail and wholesale insurance and reinsurance brokerage services markets, and increase the volume of general services that it currently provides. Its inorganic pipeline remains strong with around $300 million of annualized revenues associated with 40 term sheets signed or being prepared.

Arthur J. Gallagher currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its strong liquidity position supports Arthur J. Gallagher in its strategic initiatives. The company expects to use the additional cash flow generated by earnings to continue its mergers and acquisition strategy in brokerage and risk management operations.

So far this year, it has made 18 acquisitions. Revenue growth rates have generally been 5-15% for 2021 acquisitions to date. The buyouts provide the company with incremental capabilities and services to assist clients across Australia, the U.K., Europe and the United States. The industry player deepens focus on its long-term growth strategies of delivering organic revenue growth, and pursuing mergers and acquisitions.

Other Acquisitions in the Same Space

There have been a host of acquisitions in the insurance space of late, given its significant capital availability. Horace Mann Educators Corporation HMN agreed to buy Madison National Life Insurance Company to boost its presence in the education market. State Auto Financial Corporation STFC agreed to merge with Liberty Mutual Holding Company. Athene Holding Ltd. ATH agreed to acquire Foundation Home Loans. The deal will offer Athene better investment opportunities in high-quality yield assets.

Price Performance

Shares of Arthur J. Gallagher have gained 31.3% in a year, outperforming the industry’s increase of 7.6%. Efforts to ramp up the company’s growth profile and capital position should help the stock retain the price momentum.

Zacks Investment Research
Zacks Investment Research


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Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report

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