May 9 , 2006 – Post Spitzer, Merger Activity Picking Up, says Mystic Capital

Post Spitzer, Merger Activity Picking Up, Says Mystic Capital
By Andrew G. Simpson
May 9, 2006
Last year wasn’t the busiest year for mergers and acquisitions in the insurance agency and brokerage
field, but as concerns over various probes of the insurance industry fade, activity is picking up.
Kevin Donoghue of Mystic Capital Advisors Group, who specializes in mergers and acquisitions in the
insurance industry, says there’s been a lot of activity in the insurance industry since late 2005 right into
this year.
“It’s been a pretty exciting time period to be in the mergers and acquisitions field,” says Donoghue in an
exclusive interview in this week’s Insurance Journal broadcast at
Donoghue thinks the industry probes spearheaded by New York Attorney General Eliot Spitzer had a
dampening effect on mergers but that era is passing.
“I think some of the slowdown just related to the Spitzer investigations and how contingencies would be
affected in the industry. That affects mergers and acquisitions pricing naturally, so a lot of money that was
being readied to be deployed in the acquisition field pulled back. As those uncertainties seemed to go
away towards late ’05, the money came off the shelf and is currently being deployed into a number of
different acquisition areas, both in the retail and on the managing general agent side of the business.”
Certain players continue to be driving forces in mergers and acquisitions. “It’s still being driven by growth
expectations of the publicly traded brokers. Without acquisitions, most of them aren’t even growing
organically,” the Mystic Capital executive explains. “They’re still very active in the marketplace, so there’s
that supply / demand imbalance with them as well. It’s pretty aggressive out there, and the pricing we see
is pretty aggressive as well.”
He says some banks are still interested in buying insurance operations, although it very much depends
on the bank’s situation.
“Banks’ interest has ebbed and flowed over the past few years,” Donoghue said during the interview
conducted at the recent Target Markets Program Administrators Association meeting in Baltimore.
“I think the consolidation in the banking industry itself has created opportunities for new bank parent
companies to divest opportunities. There still are a number of banks that are interested in buying as well,
so different bank holding companies have different opinions on the insurance platform.”
It’s a good time for sellers who have reasonable expectations of prices. “There’s not a shortage of buyers
in the industry, so certainly if there’s an interested seller, it’s a good time from a supply /demand
perspective. There’s always that effect, do buyers have reasonable pricing expectations? That’s really
what keeps deals from happening versus anything,” according to the merger consultant.
For the complete interview, visit http://www.insurancejournal.com/broadcasts/player/?vid=1509.

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