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David Jasmund

E: djasmund@pcecompanies.com

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Industry Trends

Interest Rates Steady in September Fed Meeting

In a departure from consecutive quarters of rate hikes, the Federal Reserve opted to keep interest rates unchanged during their September meeting. Nevertheless, they indicated expectations of one more rate increase before the end of 2023 and a scaled-back number of reductions in 2024. Furthermore, the Fed has upgraded its economic growth forecast for this year, anticipating a 2.1% rise in GDP. The combination of stable interest rates and an optimistic economic growth outlook paints a positive picture for M&A activity.1

Banks Are Relying on Riskier Types of Deposits

U.S. banks are increasingly using brokered deposits, a lesser known but costly banking product that has attracted regulatory scrutiny. Since the second quarter, midsize and small banks have largely stabilized or even reversed the deposit outflows they experienced earlier this year, often relying on deposits facilitated through third-party brokers. Regulators are cautious about banks with high concentrations of brokered deposits, as they are seen as volatile funds that can be quickly withdrawn during challenging times.2

Despite Continued Uncertainty Banks Have Optimism for the Future of M&A

Jefferies Financial Group reported a third-quarter profit that fell below expectations, attributing to the shortfall to persistent economic uncertainty that has restrained dealmaking. Despite this, the bank remains positive, hightlighting improving market conditions, which suggest a growing momentum in mergers and acquisitions (M&A). Additionally, Jefferies is planning to bolster its team by hiring more managing directors for the upcoming year, aligning its strategy with the Federal Reserve's indication of approaching the end of its tightening cycle. 3

Resolution Life Acquires Farmers New World Life Insurance Company

Resolution Life, a prominent global life insurance group specializing in acquiring and managing life insurance policy portfolios, has entered a strategic partnership with Farmers New World Life Insurance Company (FNWL). Under this agreement, FNWL will transfer its existing individual life insurance business to a subsidiary of Resolution Life. A flow reinsurance treaty will also be established to cover FNWL's current range of individual life insurance products. Resolution Life has also collaborated with Swiss Re to retrocede all reinsured term life insurance liabilities in this intricate deal.4

M&A Volume Continues to Gain Steam

During the third quarter, the United States assumed a central position in global mergers and acquisitions.. Although the global M&A scene saw limited improvement, the U.S. significantly contributed to overall global M&A activity. Experts foresee a steady flow of deals persisting, albeit not reaching the 2021 frenzy.Experts believe that the disparity between buyer and seller expectations is diminishing, and they are steadily addressing the challenges in the current market environment.5

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • in-force individual life insurance business of FNWL
  • Security Life of Denver Insurance Company
  • $1800.00
  • The Community Financial Corporation
  • Shore Bancshares, Inc.
  • $253.68
  • Socius Insurance Services, Inc.
  • Ryan Specialty Holdings, Inc. 
  • $251.90
  • Crop Risk Services, Inc.
  • American Financial Group, Inc. 
  • $234.00
  • Salisbury Bancorp, Inc.
  • NBT Bancorp Inc. 
  • $199.38
  • Inland Bancorp, Inc.
  • Byline Bancorp, Inc. 
  • $153.41
  • Malvern Bancorp, Inc.
  • First Bank
  • $149.38
  • First Miami Bancorp, Inc.
  • United Community Banks, Inc.
  • $114.03
  • Blackhawk Bancorp, Inc.
  • First Mid Bancshares, Inc.
  • $90.35
  • Canyon Bancorporation, Inc.
  • CrossFirst Bankshares, Inc.
  • $15.21

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Oakbridge Insurance Agency LLC
  • Audax Management Company, LLC
  • n/a
  • EverBank Financial Corp.
  • Warburg Pincus LLC; Stone Point Capital LLC
  • n/a

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Eversurance, LLC
  • MyPlanAdvocate Insurance Solutions, Inc.
  • $13.20
  • Midwest Insurance Associates
  • Mid-Missouri Insurance Agency
  • n/a
  • McIntosh Chemical Federal Credit Union
  • Alabama One Credit Union
  • n/a
  • Stahl & Associates Insurance Inc.
  • Higginbotham Insurance Agency, Inc.
  • n/a
  • Citizen Choice Insurance & Investments
  • Inszone Insurance Services, Inc.
  • n/a
  • Insight Risk Technologies LLC
  • Velocity Holdco, LLC
  • n/a
  • Sanfilippo & Sons Insurance Services, LLC
  • Inszone Insurance Services, Inc.
  • n/a
  • ISU Insurance Services - The F & I Agency
  • ALKEME INC.
  • n/a
  • Hartley Cylke Pacific Insurance Services, Inc.
  • Arthur J. Gallagher & Co.
  • n/a
  • Cindy Elbert Insurance Services, Inc.
  • World Insurance Associates LLC
  • n/a

 

Source S&P Capital IQ as of 10/12/2023 and PCE Proprietary Data

PCE Transactions

Contacts

David Jasmund

Orlando Office

407-621-2111 |

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Michael Poole

Orlando Office

407-621-2111 |

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Kyle Wishing

Atlanta Office

404-994-4186 |

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Data Assumptions

This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

  1. 1. Cox, J. “Fed declines to hike, but points to rates staying higher for longer.” CNBC, 20 September, 2023.
  2. 2. Heeb, G. “Banks Load Up on $1.2 Trillion in Risky ‘Hot’ Deposits.” The Wall Street Journal, 12 September, 2023.
  3. 3. Nishant, N. & Nguyen, L. ”Jefferies third-quarter profit misses expectations as M&A sputters.” Reuters, 28 September 2023.
  4. 4. Resolution Life. “Resolution Life completes strategic transaction with Farmers New World Life Insurance Company” Resolution Life, 1 August 2023.
  5. 5. Sakoui, A. & Sen, A. “Dealmakers see rebound after US activity buoys global M&A volumes.” Reuters, 29 September, 2023.

 

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