Gallagher CEO works on $400m acquisition pipeline

Broker Arthur J Gallagher has a full pipeline of attractive acquisition targets, CEO J Patrick Gallagher, Jr. said during the first quarter 2018 results conference call.

“Our merger and acquisition pipeline is full of many attractive tuck-in opportunities, totalling about $400 million of revenue, associated with almost 60 term sheets either agreed upon or being prepared,” Gallagher, Jr. said.

Not all these potential acquisitions are expected to transact, but a fair share will, he noted. Some deals take 10 years to close, others you can be agreed within half a year, Gallagher, Jr. explained.

In the first quarter of 2018, the broker completed six brokerage acquisitions, adding around $27 million of annualized revenue, Gallagher, Jr. noted. The closing is typically slower in the first quarter because there's usually a push to get something done by year-end, he added.

The company’s brokerage segment grew revenues by 10 percent year on year to $1.20 billion in the first quarter of 2018. Net earnings in the segment expanded 33 percent year on year $239.2 million.

“We had an excellent start to 2018. During the first quarter we delivered strong total revenue growth, excellent organic revenue growth, steady growth from our tuck-in M&A strategy and continued margin expansion,” Gallagher, Jr. commented the results.

While some market participants see intense competition for mergers & acquisitions (M&A) not least due to private equity involvement, Gallagher, Jr. sees the broker in a privileged position compared to other potential buyers.

“The capabilities that we've developed are second to none,” Gallagher, Jr. said to explain why Gallagher is seen as an attractive aquirer. "There's not an account on the planet right now anywhere in the world of any size that we can't do and that turns people on,” he said.

In addition, Gallagher is attractive for sellers due to the company’s culture, Gallagher, Jr. said.
“They want to land their people in a place that feels like them and you can't do that in a private equity world.”

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