Brown & Brown Inks Deal to Acquire VAS-Affiliated Companies
Brown & Brown, Inc. BRO has agreed to acquire Vehicle Administrative Services, LP, SafeRide Motor Club, Inc. and affiliates (collectively, “VAS”). The acquisition, following the fulfillment of certain closing conditions, is expected to be completed in October 2020. However, the financial terms of the transaction were not made public.
Formed in 1998, Dallas, TX-based VAS (Vehicle Administrative Services, Ltd.) is the premier wholesale provider of automotive-related benefits, specializing in emergency roadside assistance and first notice of loss services in the United States.
VAS offers the best roadside assistance in the industry, as well as a robust suite of auto-related ancillary services and consumer auto protection products.
Rationale Behind the Deal
With this acquisition, Brown & Brown will leverage the expertise of VAS in customer service, compliance and development of new protection products, which is similar with the customer first values of Brown & Brown Dealer Services. Thus, this partnership will enable Brown & Brown to cater to collective customers with innovative solutions.
The capabilities and expertise of the acquirer will provide VAS with the opportunity to grow along with maintaining a high level of performance.
Inorganic Growth Story
Brown & Brown pursues frequent buyouts in order to achieve top-line growth. Its revenues have grown as a result of its continued focus on net new business growth and acquisitions. Notably, this latest transaction marks the fifth buyout by the insurance broker in the third quarter of 2020. In the first six months of 2020, the insurer closed 10 transactions with estimated annual revenues of $85 million.
Consistent investments along with solid earnings will aid this Zacks Rank #2 (Buy) insurance broker in its inorganic efforts. These strategic acquisitions drive Brown & Brown’s commission and fees, which, in turn, boost revenue growth.
From 1993 through the second quarter of 2020, the company acquired 546 insurance intermediary operations. It continues to make investments to drive growth and margins.
Other Acquisitions in the Same Space
There have been a host of acquisitions in the insurance brokerage space of late, given the significant capital available. Recently, Arthur J. Gallagher & Co. AJG closed the buyout of Edmonton, Alberta-based Insight Insurance & Risk Management Ltd. Marsh & McLennan Companies’ MMC unit, Oliver Wyman acquired a minority stake in Corridor Platforms, and Aon plc AON completed the acquisition of 100% share capital of Farmington Administrative Services LLC and certain assets of other Farmington companies.
Price Performance
Shares of Brown & Brown have risen 28.5% in the past year, outperforming the industry’s increase of 9%. The company’s efforts to ramp up growth and capital position should continue to drive shares higher.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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