Year-on-year transaction volumes fell during Q3 this year, says new report
The number of European insurance M&A deals for the first three quarters of 2022 hit an all-time high despite warnings that inflationary pressure will put a brake on continued momentum.
Research from FTI Consulting found there were 292 deals in the first nine months of this year, compared to 280 across Q1 and Q3 2021.
The number of M&A deals hit 190 during the same period in 2020.
The increase in deal volume comes as investors pursue opportunities to deploy unspent capital despite geopolitical tensions, economic turmoil and the rising cost of debt financing, said a statement from FTI.
The record deal volumes have been tempered by the fact insurance M&A transactions across Europe declined slightly in Q3 of 2022 – falling by two to 76, compared to 78 during the same period in 2021.
“Despite challenging market conditions and macroeconomic uncertainties, insurance intermediaries continue to face competitive auction processes and valuation multiples remain elevated, demonstrating the resilience of this sector,” said André Frazão, associate partner in the global insurance services practice at FTI Consulting.
Strong appetite
The company’s European Insurance M&A Barometer: Q3 2022 Update – released today (22 November 2022) – showed financial sponsors maintained a strong appetite for distribution and service deals.
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There were 39 acquisitions by private equity (PE) backed portfolio companies and 12 directly by private equity funds during the reporting period.
US based PE firms and bidders backed 10 acquisitions in Q3, taking the year-to-date total for this group to 38, suggesting that a strong dollar may encourage further US takeovers.
The UK and Ireland continued to lead the European insurance M&A market, accounting for 40% of the total number of deals in Q3 2022, whereas the Germany, Austria and Switzerland, France and Iberia regions saw the greatest increase in deal activity during the reporting period.
However, Frazão added that rising inflation was set to reduce the appetite for deals in the months to come as investors take a more cautious approach.
“With the ongoing inflation threat, rising interest rates could present a headwind to the buyouts market, with debt financing becoming more expensive, suggesting that valuations and deal activity may decrease in the coming quarters,” he added.
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