Insurance Broker Valuations Gone Wild

by Managing Partner, Mike Fletcher

Overview

In 25 years of working in insurance M&A, I have never seen such a wide gap in insurance broker valuations as we see today. Brown & Brown currently trades at roughly 11.2x EBITDA. Recently, publicly traded Baldwin, roughly one-fourth the size of Brown & Brown, was taken private by the Dell family office at approximately 20x EBITDA. Two weeks earlier, PE-backed USI was sold to publicly traded Aon for approximately 17x EBITDA.

As we noted before, AssuredPartners recently sold for approximately 14.3x EBITDA, while Risk Strategies traded at approximately 16x EBITDA.

In the private market where we operate, we have seen clients with $5 million to $10 million of EBITDA trade at higher valuations than public peers 50x their size, while other PE-backed brokers with $100M in EBITDA stall with few to no bids.

There is an extraordinary dispersion in valuations, and it raises an obvious question: What explains the difference?

The Decline in Insurance Broker Valuations

As we have discussed in the past, insurance broker valuations have generally declined over the past 24 months. That makes sense. Interest rates have increased from approximately 5% to 10%, and the property and casualty insurance market has entered its first meaningful soft market in years.

We have always viewed Brown & Brown as a bellwether for insurance broker valuations because it is a large, publicly traded, pure-play insurance broker with a long operating history, a diversified business, and a widely followed stock. Its valuation provides the market with one of the clearest reference points for what investors are willing to pay for an insurance brokerage platform.

Brown & Brown appears to have recognized this environment early. Its valuation declined from approximately 16.5x EBITDA at year-end 2025 to approximately 11.2x EBITDA today, a decline of about 32%.

There has certainly been some overshooting in the market. But can anyone credibly argue that Brown & Brown is worth 45% less than Baldwin? Probably not.

Why are Smaller Brokers Sometimes Trading at Higher Multiples?

For perhaps the first time ever, smaller brokers, those with approximately $1 million to $10 million of EBITDA, are sometimes receiving higher valuation multiples than much larger brokers.

Perverse Incentives

Our theory about why this is happening has a somewhat darker side. In theory, a private equity investor would be better off buying shares of Brown & Brown than buying a $1 million EBITDA brokerage in the Midwest with a single line of business and one or two producers, particularly if the departure of one producer could put the entire business at risk.

But private equity firms cannot simply buy Brown & Brown stock. Why?

Private equity firms typically charge their investors a 2% management fee and a 20% carried-interest share of profits. They cannot easily go back to their limited partners and say, “We invested in a publicly traded company that you could have bought yourself, without paying us a management fee.”

So what are they supposed to do? Return the capital? That seems unlikely when a $5 billion fund can generate approximately $100 million a year in management fees.

At the same time, are they going to buy a company with $100 million to $500 million of EBITDA at 16x and then announce to the market that they bought a private company, one-quarter the size, with more risk, less established management, and less liquidity, for 50% more than they could have paid for a public company?

Probably not.

Instead, paying 11x to 13x for a smaller brokerage solves several problems:

It allows the firm to deploy capital without the market knowing all of the details of the transaction.
It gives the firm time for valuations to recover and/or interest rates to decline.
It provides a path to create value through growth, acquisitions, and operational improvements.
It avoids the optics of paying a substantial premium for a large private company when comparable public companies are available at lower multiples.

As a result, in today’s market, a business generating $5 million of EBITDA may trade at a higher multiple than a business generating $100 million of EBITDA.

That may not be rational from a fundamental valuation perspective, but it can make sense within the incentives and constraints of the private equity model.

Aon and USI

The Aon-USI transaction is a different situation.

Aon is a public company and does not have the same private equity constraints. It also trades at approximately 13x EBITDA, and USI is a high-quality asset.

Is USI worth roughly 52% more than Brown & Brown? Probably not. But Aon was not going to buy Brown & Brown. If it had, Aon would likely have had to pay a control premium for a much larger public company.

USI, on the other hand, is a high-quality, best-in-class brokerage platform that Aon could acquire at a price that made strategic sense. Aon may have been willing to pay a premium because of the quality of the asset, the potential synergies, and the opportunity to add scale in important markets. It should also be noted that the market wasn’t charmed: After announcing the $17 billion deal, Aon stock dropped roughly 7%, effectively wiping out $5 billion of market value in a single day.

The Baldwin Family Office Transaction

The Baldwin transaction is the most interesting of the group.

Baldwin turned heads when it went public, and the results did not go well. Taking the company private through a traditional private equity transaction might not have made much sense. Selling to Michael Dell’s family office, however, is a different story.

Dell is known for taking a truly long-term approach to investing. Did the family office overpay for Baldwin? On the surface, it appears so. A purchase price of approximately 20x EBITDA is difficult to justify using a traditional private equity return framework.

But the family office receives something that a conventional private equity buyer does not: time.

It can own an insurance broker indefinitely. It does not have to sell the business in five years. It does not have to meet a fund-return hurdle. It does not have to generate a 25% internal rate of return for outside investors. And it does not have to manage around a fixed investment period.

At 20x EBITDA, the buyer is effectively earning an initial EBITDA yield of approximately 5%, plus whatever growth, inflation protection, and operational upside the business produces over time.

That may not be attractive to a traditional private equity fund. But for a permanent-capital investor that is investing their own money, it can make sense on several fronts.

The Bigger Question

These transactions highlight a fundamental disconnect in today’s insurance brokerage market. The highest multiples are not necessarily going to the largest, safest, or most liquid businesses. Instead, valuations are being shaped by the type of buyer, the buyer’s capital structure, its return requirements, its time horizon, and its need to deploy capital.

A traditional private equity fund, a strategic acquirer, a public-market investor, and a permanent-capital family office may all look at the same brokerage and arrive at very different valuations.

That is how a $5 million EBITDA broker can end up trading at a higher multiple than a $100 million EBITDA broker and why insurance broker valuations have, at least for now, gone wild.

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