M&A activity in the UK insurance distribution market has seen a slow start to 2025, with subdued dealmaking during the first two months of the year. While it is too early in the year to draw concrete conclusions, new data suggests that there could be a slowdown in insurance M&A this year.
According to data from MarshBerry, there have been just nine deals announced in the sector during the year to date. By comparison, 23 transactions had been announced during the same period of 2024.
There were just three deals announced in January 2025, the lowest figure for a single month since 2017, while February saw only a slight improvement, with five deals announced. Both figures fall well below the average monthly volume of 9.6 deals since 2016.
The UK has been the most active market for insurance M&A in Europe over recent years, but there has been a growing feeling among some analysts that the supply of strong acquisition targets is shrinking as the sector becomes more mature and consolidated.
Much activity has been driven by a select few major consolidators, many of which are backed by private equity firms. According to MarshBerry, the top ten buyers in the sector were responsible for around 60 per cent of UK deals last year, a total of 55 deals.
However, just one of these top ten firms has completed a UK transaction so far this year, with none of the top five completing a deal in the UK. MarshBerry notes that two of the top five have completed deals in continental Europe this year. Again, although it is premature to draw conclusions from two months of activity, this could suggest that the epicentre of European activity is moving away from the UK.
Despite the slow start to the year, though, MarshBerry asserts that the tailwinds that have driven consolidation over the past decade remain present and that several buyers have indicated that they continue to have strong deal pipelines, implying that activity could improve significantly over the coming months.
MarshBerry adds that they do not expect tax changes set to come in effect from April 6 2025 to be a major driver of dealmaking during the remainder of the tax year. In October last year, the main rate of Capital Gains Tax increased from 20 per cent to 24 per cent, while the rate of CGT charged on business asset disposal relief will increase from 10 per cent to 14 per cent next month and subsequently to 18 per cent from April 6 2026.
While the increases appear sharp, MarshBerry calculates that the maximum benefit from BADR per individual sellers stands at £40,000 – unlikely to provide sufficient motivation for the majority of owners to accelerate their exit strategies.
More likely to contribute to activity, according to the report, is the upcoming increase in employers’ National Insurance contributions – which will rise to 15 per cent from April 6 2025. Combined with a tough economic environment, this additional cost pressure could have a significant impact on profitability and may contribute to growing M&A activity as the year progresses.
Find out more about M&A in the UK insurance sector
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