Acquired brokerage PCF Insurance Services will continue with its growth strategy following the $500 million equity investment it announced on Friday, but the pace of business may slow, its top executives said.
“This is strategic capital that we are taking at this time so that we can be appropriately funded to take advantage of the market in the coming year,” Felix Morgan, chief financial officer and chief operating officer of the Lehi, Utah-based brokerage, said in an interview.
Although higher interest rates are likely to slow the overall insurance broker M&A market in 2023 and PCF’s buying pace is likely to slow, said Peter Foy, CEO of PCF.
PCF, which completed a management buyout from its private equity owners in 2021, said last week it has secured a $500 million preferred stock investment in a transaction led by private equity firms Carlyle Group Inc. and HGGC LLC, one of its existing private equity investors . The investment values PCF at $4.7 billion, the company said.
PCF management will still own more than 75% of the company after the financing deal, Foy said.
According to data from Optis Partners LLC, PCF was the second most active acquirer of agents and brokers in 2022 with 71 deals announced. In 2021, it announced 99 deals. Overall last year, M&A among brokers slowed significantly in the second half of the year as interest rates rose.
“Our goal was to raise more capital to keep our acquisitions going as the market changes,” Mr. Foy.
PCF has not completed any acquisitions so far in 2023 but has several in the pipeline that it expects to complete in March, he said.
PCF is the 20th largest broker of US companies, according to Business insurances latest ranking.