Analysts at law firm Clyde & Co believe that global insurance mergers and acquisitions (M&A) activity is “set to soar” in 2021 despite economic challenges due to the pandemic.
According to Clyde & Co data, there were 407 completed M&A deal worldwide in the re/insurance sector over 2020, down from 419 in the previous year.
An anticipated pandemic-induced dip in activity in the second half of the year failed to materialise, however, with 206 deals in H2 2020, slightly up from 201 in the first six months.
The Americas remained the most active region for M&A last year, with 192 deals in 2020, up 6% on 2019.
Deals in Asia Pacific also rose 9% to a total of 75, but the Middle East and Africa saw the biggest percentage gains, up 167% to 32 completed deals. In contrast, activity in Europe was down by almost a third (34%) year-on-year, to 103 from 155 in 2019.
“Insurance transaction activity worldwide belied expectations in 2020,” said Ivor Edwards, Head of Clyde & Co’s European Corporate Insurance Group. “Deal-makers in the insurance industry, like many others, paused for reflection in the first half of the year, but not for long.”
“Strategic players in the market and M&A specialists clearly did not want to be relegated to the side lines and quickly regrouped to identify and pursue opportunities. Given that remote working does not easily lend itself to negotiations, due diligence and all the other elements that make up a transaction, the speed with which companies adapted to the new environment was impressive,” Edwards continued.
“With deal announcements continuing apace, we expect the level of completed M&A in the coming months to accelerate as re/insurance businesses scent opportunities to build scale, generate efficiencies and reach new customers in new markets.”
Given the volume of deals announced in recent months, Clyde & Co predicts that insurance M&A will surge in the first half of 2021.
The number of completed deals worldwide is likely to surpass 220 in a six-month period for the first time since 2019 and could go even higher in the second half of the year, analysts believe.
“Deal-makers’ appetites have returned, buoyed by growing confidence in the economic outlook and the sense that there are opportunities to be had,” Edwards concluded.
“Despite market hardening, many of the fundamentals driving M&A will persist. These include competition for assets, the need to diversify portfolios, add digital capabilities, and increase scale and market share. The availability of plentiful capital, combined with a deeper pool of targets, will give buyers plenty of choice although we expect them to select acquisitions carefully to ensure the best fit with their strategic objectives.”
