The Great Recession, a soft insurance market and uncertainty about health reform contributed to a 40% drop in insurance brokerage mergers and acquisitions between 2008 and 2009, according to Hales & Company.
The number of insurance brokerage M&A deals fell to 185 in 2009, down 40% from 307 transactions in 2008, according to Hales & Company, New York.
The past year was one of the least active years in the Naughties, and the first year that the number of deals has dipped below 200 since 2003, according to Hales.
Transaction valuations fell about 10% to 20% from 2008 levels, Hales reports.
In "guaranteed purchase price for revenue" transactions, for example, the average price was about 4.75 times to 5.75 times the target company's "earnings before interest taxes depreciation and amortization" in 2009, compared with 5.75 times to 6.50 times EBITDA in 2008.
This decrease in valuation multiples led to a big gap between the prices that sellers wanted to get and the prices that buyers wanted to pay, and that caused many sellers to take a wait-and-see approach, Hales says.
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