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Brown & Brown (BRO) Subsidiary Buys ADM Marketing Assets

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Brown & Brown, Inc. BRO subsidiary, Brown & Brown Dealer Services (“BBDS”) has acquired considerably all ADM Marketing Group, Inc. and its affiliate ADM Insurance Services, Ltd. (collectively, ADM) assets.

Camp Hill, PA - based ADM Marketing Group was founded in 1987. It furnishes auto dealers with finance and insurance (F&I) products in Pennsylvania, Delaware, Maryland and New Jersey.  ADM Marketing Group has established itself as one of the top F&I products and services companies in the Mid-Atlantic region. ADM Marketing Group is a provider of financial service products, consulting and training, and specializes in automobile, RV, and motorcycle dealerships, along with financial institutions.

Its complete suite of F&I products and services includes vehicle service contracts, environmental service contracts, pre-paid maintenance, GAP insurance, anti-theft and loyalty retention solutions.

With this acquisition, Brown & Brown will leverage the expertise of ADM Marketing Group in offering F&I products and services. Also, this deal will provide the acquirer with growth opportunity for its BBDS operations.

Notably, this latest transaction marks the first buyout by the insurance broker in the first quarter of 2021. During the nine months ended Sep 30, 2020, it closed 16 transactions, with estimated annual revenues of $116 million.

Inorganic Growth Story

Brown & Brown along with its subsidiaries pursues frequent buyouts in order to achieve top-line growth. Its revenues have grown as a result of its continued focus on net new business growth and acquisitions.

Consistent investments along with solid earnings will likely aid this Zacks Rank #2 (Buy) insurance broker in its inorganic efforts. The acquisitions drive Brown & Brown’s commission and fees, which, in turn, boost revenue growth.

From 1993 through the third quarter of 2020, the company acquired 552 insurance intermediary operations. It remains well-positioned with its capital structure and has been able to access sufficient capital via its $1.1 billion available cash to fund growth. Moreover, consistent operational results have helped Brown & Brown to generate solid cash flows to be deployed in strategic initiatives.

Shares of Brown & Brown have risen 17% in the past year, outperforming the industry’s growth of 1.1%. The company’s efforts to ramp up growth and capital position should continue to drive shares higher.

Other Acquisitions in the Same Space

There has been a host of acquisitions in the insurance space of late, given the significant capital availability. Recently, Arthur J. Gallagher & Co. AJG closed the buyout of Jacksonville, FL-based Harden & Associates, Inc. to boost its healthcare and real estate practices in the Southeast. Assurant AIZ acquired EPG Insurance to consolidate its presence in the automotive service contract space. Marsh & McLennan Companies, Inc.’s MMC unit Marsh & McLennan Agency LLC (MMA) recently acquired the independent agency INSPRO in Nebraska.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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