By James Thaler

March 4 - (The Insurer) - Arthur J Gallagher has announced that it is acquiring employee-owned D&O specialist retail broker Woodruff Sawyer for $1.2 billion, or about 13.64x the San Francisco-based broker’s $88 million in trailing 12-month Ebitdac.

The announcement confirms The Insurer’s reporting last week that Gallagher was close to a $1 billion-plus transaction for the firm, which has been independent since it was founded in 1918.

On Tuesday Gallagher disclosed that Woodruff generated $268 million of revenue in 2024, meaning that the deal values the firm at around 4.48x last year’s revenue.

The transaction is expected to close in the second quarter of this year, while Gallagher also said that integration costs and expected non-cash management retention costs are expected to total $150 million over the next three years.

In its announcement, Gallagher noted that Woodruff provides a full suite of commercial property/casualty products, employee benefits solutions and risk management services with a focus on middle and large market clients.

Operating from 14 U.S. offices and one UK office, Woodruff has expertise in management liability, construction and real estate.

Gallagher said that the Woodruff team, led by current CEO Andy Barrengos, will operate under the direction of Peter Doyle, head of Gallagher's U.S. retail property/casualty brokerage operations.

"Woodruff Sawyer has an outstanding reputation in our industry, and we have long admired their niche expertise and client-focused culture. Our complementary strengths will enhance the value we deliver to our clients and significantly expand our capabilities," said Pat Gallagher, the acquiring firm’s chairman and CEO.

"I look forward to welcoming Andy and the more than 600 Woodruff Sawyer colleagues to our growing Gallagher family of professionals," he added.

Barrengos, who has served as Woodruff’s CEO since 2016 and is also its chairman, also commented on the deal.

"We are thrilled to join Gallagher, who shares our deep commitment to employees and has a culture defined by integrity, trust and excellence,” Barrengos said in a statement.

“We look forward to leveraging our complementary expertise and Gallagher's substantial global capabilities to provide outstanding support for our clients," he concluded.

The Insurer previously broke the news earlier on Tuesday that Woodruff was closing on a deal with an unconfirmed buyer, before later confirming that firm’s identity as Gallagher.

The deal by Gallagher for Woodruff continues a remarkable run of acquisitions by the Illinois-based middle-market brokerage firm, after The Insurer broke the news in December that it was acquiring GTCR-backed AssuredPartners for $13.5 billion.

Among other major transactions the company has sealed in recent years was its $3.3 billion takeover of reinsurance intermediary Willis Re in 2021, as well as a series of acquisitions of insurance brokerage businesses owned by banks.

Those included deals for Baton Rouge-based Cadence Insurance from Cadence Bank for $904 million and Eastern Bank’s insurance operations for $501 million, both in 2023.

In 2022, Gallagher bought M&T Insurance Services from M&T Bank for $192.5 million.

Gallagher’s acquisition spree has fuelled its rise to becoming the third-largest U.S. brokerage, behind Marsh and Aon. Marsh delivered full-year 2024 revenue of $24.5 billion, versus $15.70 billion for Aon and $11.38 billion for Gallagher.

The deal for AssuredPartners is anticipated to add $2.9 billion of pro forma trailing 12-month revenue for Gallagher and $938 million of pro forma trailing 12-month adjusted Ebidtac.

Gallagher has an $84 billion market capitalisation, up from around $65 billion as recently as December, and has been a steady acquirer, completing 19 deals on average in the last five years including 25 in 2023 and 48 in 2024.

The company was involved in talks to acquire TIH-owned retailer McGriff Insurance Services last year, before being edged out in the process by Marsh.

The firm’s share price has surged by 39% in the past year to $337.27 at Tuesday’s close and is up by 235% in the last five years.

In December, shortly after the AssuredPartners deal was announced, Gallagher closed an $8.5 billion share offering, selling 30,357,143 shares of common stock to the public at $280.00 per share to fund the deal.

Gallagher did not disclose any plans to raise additional funding in announcing its deal for Woodruff.

WOODRUFF ENDING OVER A CENTURY OF INDEPENDENCE

Woodruff, which has been around since 1918 and is employee owned rather than private equity-backed, ranks among the top 40 U.S. intermediaries

The company is largely known as a D&O specialist. There have been challenging conditions in the public D&O market, which has softened dramatically in the last two years, with rate decreases in turn contributing to a downturn in commissions.

A sale of Woodruff adds to the growing momentum of major M&A across the insurance distribution landscape, after an acceleration of large-scale deals announced in the last year or so.

In addition to Arthur J Gallagher’s $13.5 billion deal for AssuredPartners, The Insurer broke the news in December 2023 that Aon would be acquiring middle market specialist NFP and was the first to report that TIH Insurance was entertaining offers for retail intermediary McGriff.

McGriff was ultimately sold to Marsh in November in a $7.75 billion deal.

Howden also remains in active deal talks for its long-expected entry into U.S. retail broking, with Boston-based Risk Strategies parent Accession Risk Management Group among the parties with which it is currently engaged.

Meanwhile, in the wholesale space, The Insurer broke the news that newly independent wholesaler CRC Group is in active talks to acquire its fellow Stone Point-backed intermediary ARC Excess & Surplus.

CRC’s wholesale rival Ryan Specialty has been especially active in the last two years, having acquired Innovisk Capital Partners, US Assure, Velocity Risk Underwriters and Ethos’ property and casualty business from Ascot in the last nine months, among others.

Last year saw a slow down in total North American agent and broker M&A deal flow but a pick-up in large scale transactions.

In its most recent report on the sector, Optis Partners predicted further activity in the next 12-24 months involving larger-scale M&A deals.