Gallagher eyes large M&A targets but ‘not chasing top valuations’

The M&A pipeline is growing fast for global broker  Arthur J Gallagher where tuck-in acquisitions of moderate-sized brokerages is the top priority for capital deployment, company officials have indicated.

“We have more opportunities than we know what to do with,” CFO Douglas Howell told an investor call, insisting that sellers are chasing Gallagher more than Gallagher has to chase targets. “We have a lot of great opportunities in the pipeline still at reasonable valuations.”

“We are not chasing the top valuations,” he said.

The Gallagher count of terms sheets signed, or in preparation, has risen to nearly 50 firms representing over $400 million in annual revenues. That sum is up from a count of roughly 40 firms with $350 million in revenues heralded as recently as end-July.

Only the mantra is unchanged: “Not all of these will close, but we will get our fair share.”

Gallagher continues to brag about a $4 billion war chest figure for 2022-23 made up of cash on hand, expected cash generation and available credit lines, CFO Howell said.

M&A is the preferred form of growth and capital deployment, well ahead of the share buybacks that wait at the end of the day if M&A hopes fall through.

“I’d rather spend every single penny of that on nice tuck-in acquisitions than buy our own stock back,” Howell said.

Buybacks are a “cheap thrill for a moment,” he noted, “but you don’t get more brains in the organisation, there’s no opportunity to go out and tackle a bigger client together.”

“Let’s use that cash to get more players on to the team,” he concluded.

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