Gallagher growth rooted in health-care complexities

The Besselman & Little Agency was brokerage giant Arthur J. Gallagher & Co.’s second Baton Rouge acquisition recently and third in Louisiana this year as part of a growth strategy for the Illinois-based company.

Mitch Brashier, Arthur J. Gallagher’s southeast regional manager, said a major reason the pace of these deals has picked up is the impact of federal health-care legislation under the Obama administration.

Most of the recent acquisitions involve agencies that focus on employee benefits, retirement services and human resource consulting, Brashier said.

With “Obamacare” coming into play, health insurance agents must navigate an increasingly complicated regulatory environment, he said.

A national company like Arthur Gallagher has far more resources to research the legislation, understand what the new law will change, and how that affects businesses, Brashier said.

Joining with Arthur Gallagher gives a local agency access to those resources so the agency can better help its clients.

Mergers and acquisitions are a major part of Arthur J. Gallagher’s growth strategy.

The domestic agencies acquired in 2011 contributed $102 million in revenue to the company.

There is a “vast pipeline” of acquisition targets, both domestically and abroad, according to the firm’s most-recent investment presentation. There are around 18,000 agents/brokers in the United States’ highly fragmented market, and many baby boomers are looking for an exit strategy.

Brashier said a merger/acquisition can allow a person who’s built a business to take the equity from his company and turn it into stock that can be traded.

National health changes limits overhead costs for insurers, which means that health insurance agents and brokers are seeing their commissions reduced.

A survey by the Louisiana Association of Health Underwriters found that 64 percent of respondents saw their business revenue decrease in 2010.

Four percent of those surveyed left the industry as a result of health reform and its economic impact, according to the association.

Brashier said the local acquisitions all have the same people running the offices.

Arthur J. Gallagher prefers to keep the agency management in place, he said.

“In our business, our assets go home at night. We sell a promise to pay if there’s a claim, but we don’t have a product that you can touch and taste or feel,” Brashier said.

“The only reason to do mergers is to attract top-notch people. We want them to stay on and run it (the agency).”