Why prospects for Gallagher look good as it heads into 2019

That is according to Morgan Stanley, who have analysed the performance of the global broker.

They predict: 

• Gallagher will finish the year with organic growth around 5%
• Gallagher will notch up between 5% and 6% organic growth next year
• The global broker snapped up around $250m in acquisitions this year. It has a strong $500m pipeline in 2019

The broker should be able to expand its profit margins due to recent restructuring and the cheaper costs of its offshoring, combined with decent organic growth.

Increases in wages and real estate expenses will act as a drag on expanding profit margins.

Gallagher: attractive home for selling brokers

Gallagher is seen as an attractive home for brokers looking to sell.

“AJG is attracting smaller brokers with its scale, capabilities and collaborative culture,” says Morgan Stanley’s highly-respected Gallagher analyst team Kai Pan, Michael Phillips and Lisa Nekrasova. 

Gallagher will issue more debt for acquisitions, but leverage will remain 2.5 earnings to debt ratio, the Morgan Stanley team says. 

A leverage ratio ratio below three is widely believed to be comfortable by bankers and analysts. 

As reported in Insurance Times, the UK remains very much part of the acquisitional picture, with Gallagher earlier this month rounding off its fourth UK acquisition of the year. 

After snapping up Pavey Group, chief executive Pat Gallagher said the firm was ’well respected firm with a complementary culture.”

UK retail chief Michael Rea spoke to Insurance Times earlier this year, to outline his broad M&A plans for the UK.