Arthur J. Gallagher & Co.'s pending $13.45 billion acquisition of fellow US insurance broker AssuredPartners Inc. will not stymie Gallagher's pursuit of smaller deals, even in the short term, according to top executives.

"We are going to continue on. We announced acquisitions last week," J. Patrick Gallagher Jr., Gallagher's chairman and CEO, told analysts on a deal call. "Our team is focused and ready to go."

"Looking ahead we don't see this transaction as slowing our ongoing tuck-in M&A strategy," Gallagher CFO Douglas Howell said on the call. "Tuck-in acquisitions are an integral part of our growth story and ... we believe we will get more opportunities for tuck-ins when we combine with AssuredPartners."

Gallagher announced Dec. 9 that it would buy Orlando, Florida-based Assured Partners, a property and casualty insurance broker with pro-forma revenues of $2.9 billion and $938 million of earnings before interest, tax, depreciation, amortization and change in estimated acquisition earnout payables (EBITDAC) in the year to Sept. 30, according to Gallagher's deal presentation. The acquisition will boost Gallagher's presence in mid-market commercial insurance. In addition to 40 US states, AssuredPartners has operations in the UK and Ireland.

Gallagher is paying 14.3x EBITDAC for AssuredPartners, which falls to 11.3x after factoring in a $1 billion deferred tax asset and expected deal synergies.

There is "not that much overlap" between the acquisition pipelines of Gallagher and AssuredPartners, J. Patrick Gallagher said. Like Gallagher, AssuredPartners has been actively acquiring smaller brokers and has completed 214 acquisitions since 2024, with an average EBITDAC multiple of 10x to 11x, according to the deal presentation. The CEO added that Gallagher "never even got a look at" 94% of AssuredPartners' acquisitions.

Gallagher buys 50 to 60 brokers a year, most of which have less than $10 million of revenue, the CEO said. "If you add [Gallagher's and AssuredPartners' acquisition pipelines] together, could we maybe do 100 deals a year, 110? I think we could. And I think that's a real positive."

Gallagher expects the addition of AssuredPartners to be 10% to 12% accretive to its trailing 12 month September 2024 adjusted earnings per share. The company expects deal synergies of $160 million, of which $60 million are revenue synergies and $100 million expense synergies. Gallagher expects to pay $500 million over three years to integrate the acquisition.

The company has factored in "zero" loss of revenue from the combination of the two firms, J. Patrick Gallagher said. "When we did the due diligence, actually getting down to account levels, we're not looking at the account having to pick one of us. It just doesn't exist. And I think when we put the two together the argument's going to be so compelling that they're going to stay."

The CEO also said that the expected cost savings will not come from job cuts. He said Gallagher has to hire 5,000 new people a year in the US to keep up with existing revenue growth. "We've got lots of needs for good, solid people in this company, and this is not about synergizing out jobs," he said.

The AssuredPartners brand, however, will be discontinued, the CEO said.