01—Abstract
Summary
Summary of the 8-K filed December 9, 2024. Cited figures are marked; the original filing is the authoritative source.
On December 7, 2024, Arthur J.
Gallagher & Co. (AJG) agreed to acquire AssuredPartners, a U.S. middle-market insurance broker owned by GTCR and Apax, for $13.45 billiona in cash. Management cites a pro forma EBITDAC multiple of 14.3x on the gross price, or about 11.3x net of an estimated $1.0 billion deferred tax asset and estimated synergies. The deal is expected to close in Q1 2025, subject to U.S., U.K. and Ireland regulatory clearances, with an outside date of March 9, 2026 (extendable to July 7, 2026).
Gallagher's obligations are not conditioned on financing. Financing is a mix of a 364-day, $13.45 billionb senior unsecured bridge facility from Bank of America and Morgan Stanley, plus planned permanent funding through a roughly 31 million share common equity offering (about $8.3 billion net) and a roughly $4.95 billion senior notes offering at a weighted average coupon of about 5.40%. Pro forma, the bridge would be replaced by these permanent sources.
Management states the funding does not inhibit ongoing tuck-in M&A and that the company expects to keep its solid investment-grade rating. The pro forma statements show diluted EPS of $5.00c for the nine months ended September 30, 2024 versus $5.40 reported, which is dilutive on a GAAP basis because of about $285 million per nine months of new expiration-list amortization and roughly $205 million of acquisition interest and amortization. Management, however, guides to double-digit adjusted EPS accretion, roughly 10-12% on a trailing twelve-month basis including synergies.
For investors, the central questions are leverage, dilution and integration. AssuredPartners brings about $2.9 billiond of trailing revenue and $938 million of EBITDAC, and Gallagher expects about $160 million of run-rate synergies against roughly $500 million of integration costs, including $200 million of non-cash retention awards, over three years. The transaction is large relative to Gallagher's historical tuck-in pace, so execution risk, the equity issuance and the amount of added debt are the key items to monitor.
02—Key points
Key Highlights
- Acquisition of AssuredPartners for $13.45 billion in cash (gross); about $12.45 billion net of an estimated $1.0 billion deferred tax asset, per company disclosure.
- Implied valuation of 14.3x pro forma EBITDAC on gross consideration, or 11.3x net of the DTA and estimated synergies.
- Funding plan: a $13.45 billion 364-day bridge facility, to be refinanced with about $8.3 billion of net common equity (31 million shares) and about $4.95 billion of senior notes at roughly 5.40%.
- Expected synergies of about $160 million and integration costs of about $500 million (including $200 million of non-cash retention awards) over three years.
- Management guides to roughly 10-12% trailing adjusted GAAP EPS accretion including synergies, but pro forma GAAP diluted EPS is lower before adjustments (nine-month pro forma $5.00 vs. $5.40 reported) due to new amortization and interest.
- Target has about 10,900 employees and about 400 offices across the U.S., U.K. and Ireland, with $2.9 billion of trailing revenue and $938 million of EBITDAC.
- Closing is expected in Q1 2025, subject to regulatory approvals; the outside date is March 9, 2026, extendable to July 7, 2026, and financing is not a closing condition.
03—Questions
Frequently Asked Questions
How will Gallagher pay for the $13.45 billion acquisition?
The filing describes a bridge commitment of $13.45 billion from Bank of America and Morgan Stanley, which is intended to be replaced by permanent financing. The pro forma analysis assumes about $8.3 billion of net proceeds from a 31 million share common equity offering and about $4.95 billion of senior unsecured notes at a weighted average coupon of about 5.40%. The bridge is reduced by any equity or notes issued before closing.
Is the deal accretive or dilutive to earnings?
On management's adjusted EPS basis, the deal is described as double-digit accretive, roughly 10-12% on a trailing 12-month basis including synergies. On a GAAP basis in the pro forma tables, diluted EPS falls to $5.00 from $5.40 for the nine months ended September 30, 2024. The gap reflects about $285 million of nine-month expiration-list amortization and roughly $205 million of acquisition-related interest and amortization. Adjusted and GAAP results differ mainly because of these acquisition intangibles and financing costs.
What are the main risks to completing the deal?
Closing depends on regulatory clearances in the U.S., U.K. and Ireland, and on the outside date of March 9, 2026 (extendable to July 7, 2026). The filing also flags integration risk, the chance that synergies are not realized, higher leverage, possible conditions imposed by regulators, and the risk that free cash flow or financing proves insufficient. Gallagher's obligation to close is not conditioned on financing.
How will the transaction affect Gallagher's leverage and credit profile?
The filing states that management expects to fund the deal with long-term debt, short-term borrowings, free cash and common equity, and that the company expects to maintain its current solid investment-grade rating. The equity component is designed to limit debt growth, but the new notes and bridge refinancing will add meaningful debt. Investors should watch the post-closing leverage ratio and rating agency commentary.
Is the AssuredPartners financial information audited?
The 2023 annual financial statements for Dolphin TopCo, the AssuredPartners holding company, are audited by PricewaterhouseCoopers LLP under U.S. GAAS, with the report dated December 6, 2024. The September 30, 2024 interim financial statements are unaudited. The pro forma information is unaudited, preliminary and illustrative, and it may change as purchase price allocation is finalized.
04—Continue