Arthur J. Gallagher & Co. AJG recently acquired Super-Advice Corporate Services Pty Ltd and Personal Advice Services Pty Ltd, collectively known as Super-Advice. This buyout is expected to help the acquirer not only expand but also improve its superannuation as well as employee benefits consulting service abilities throughout Western Australia and Sydney. Thus, the consolidation is expected to enable the insurance broker to fortify its presence in Australia. However, financial details of the transaction were kept under wraps.
Closer Look at the Transaction
Established in 2002, Super-Advice offers employee benefits consulting and corporate advisory services with special focus on corporate superannuation and employee group insurance. This in turn, allowed the company to earn the status of a key leader regarding the aforementioned services in Australia. By acknowledging every business’ individual identity and core values, the company helps clients deliver customized solutions while handling all the necessary employee enquiries and administration issues, efficiently and diligently. Notably, the acquired company will continue to operate from the current locations of Perth and Sydney after the completion of the buyout.
The latest integration is anticipated to be a substantial value addition to the acquirer’s already robust inorganic portfolio. The team at Super-Advice will help boost the acquirer’s employee benefits consulting and individual Wealth Management abilities, thereby solidifying its footprint across Australia. Given the reputation built by Super-Advice over a considerable period of time, the insurance broker is likely to leverage this goodwill and the strength offered by the acquired entity.
With this transaction, Arthur J. Gallagher looks to improve its employee benefit consulting service profile, which not only offers a detailed knowledge on the employee benefits market but also helps meeting the clients’ fundamental business objectives most efficiently. Therefore, the latest consolidation is expected to reinforce Arthur J. Gallagher’s strong inorganic growth profile as well as add capabilities to its insurance brokerage service portfolio.
With respect to cementing its existence in Australia and boosting its superannuation and employee benefits business, Arthur J. Gallagher acquired Brisbane, Queensland-based Finergy Solutions Pty Ltd and Sydney, New South Wales-based Avantek Pty Ltd, which will provide it with the capacity to offer tailor-made and innovative solutions to its clients.
Arthur J. Gallagher’s discerning M&A activity bears testimony to its compelling inorganic growth strategy. Year to date, the company has successfully completed 26 mergers for an aggregate amount of approximately $240 million. It remains optimistic about its ability to draw acquisition partners in its typical small tuck-in size at fair prices.
Over the past few years, Arthur J. Gallagher’s impressive progress has been primarily cushioned by organic sales as well as prudent buyouts and mergers. The company has been closely monitoring its acquisition pipeline in the retail employee benefits brokerage and wholesale brokerage areas, which remains sturdy with about $300 million of revenues. Further, driven by the number and size of non-U.S. purchases, the company’s top line, fed with international contribution, is likely to improve.
Zacks Rank and Share Price Movement
Arthur J. Gallagher carries a Zacks Rank #3 (Hold). Shares of the company have rallied 14% year to date, outperforming its industry’s rise of 5.3%. We expect top-line growth, smart acquisitions and a healthy capital position to push the shares up in the near term.
Other Acquisitions in the Insurance Space
We have been noticing insurers adopting the inorganic route to enrich their portfolio for a while now. The insurance industry has been arresting attention with a host of acquisitions on the back of its all-time high available capital resource.
Recently, Enstar Holdings (US) LLC, a unit of Enstar Group Limited ESGR, signed an agreement to acquire Maiden Reinsurance North America, a U.S. diversified business of Maiden Holdings, Ltd. MHLD. The buyout will further strengthen Enstar Group’s dominance in the market with respect to closing legacy acquisitions and also, ramping up its inorganic growth portfolio. Further in July, Brown & Brown, Inc.’s BRO unit, The Advocator Group, LLC, announced buying Professional Disability Associates, LLC to provide enhanced services that will ultimately result in strengthening substantial carrier, customer and client relationships.
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