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Arthur J. Gallagher (AJG) Buys Optimum Talent, Boosts Portfolio

Arthur J. Gallagher & Co. AJG acquired Optimum Talent Inc. The details of the transaction were not revealed. Shares of Arthur J. Gallagher gained 0.7% on Friday’s trading.

Founded in 1981, Montreal, Quebec-based Optimum Talent provides human resource services and offers career management, executive coaching, search, and talent development services. Optimum Talent caters to customers across Canada.

Optimum Talent collaborates with leading organizations to recruit, develop, engage, retain and transition talent. Through a strategic partnership with the Career Star Group, the company executes global outplacement and leadership coaching projects with the same standard of excellence that it delivers nationally.

With the acquisition of Optimum Talent, Gallagher Better Works' organizational wellbeing strategy will be introduced to clients of the acquired company.

Gallagher Better Works, an arm of Arthur J. Gallagher, is a comprehensive approach to benefits, compensation, retirement, employee communication and workplace culture, which aligns human capital strategy with overall business goals. It gives HR departments an enormous toolbox full of solutions that promote better organizational wellbeing. It offers sustainable, competitive compensation plans to help develop top talent and alignment of rewards systems through benchmarking and equity analyses.

Therefore, this acquisition will extend Gallagher’s senior management relationships throughout Canada, which in turn will make way for further opportunities for capabilities discussions and consulting engagements.

Notably, the latest transaction marks Arthur J. Gallagher’s second buyout in the fourth quarter of 2020. Its robust capital position along with sustained solid operational performance should continue to back its inorganic efforts.

Inorganic Growth Story

Acquisitions enable this Zacks Rank #2 (Buy) insurance broker to expand into desirable geographic locations, further extend its presence in retail and wholesale insurance and reinsurance brokerage services markets and increase the volume of general services currently provided. Its inorganic pipeline remains strong, with revenues of about $350 million associated with 40 term sheets either agreed upon or being prepared.

In the first nine months of 2020, the company completed 17 mergers, representing about $151.2 million of annualized revenues. Revenue growth rates generally ranged from 2.5% to 15% for 2020 acquisitions. The buyouts provide the company with incremental capabilities and services to assist clients across Australia, the U.K., Europe and the United States. The company remains focused on its long-term growth strategies of delivering organic revenue growth and pursuing mergers and acquisitions.

Another Acquisition in the Same Space

There have been a host of acquisitions in the insurance space of late, given the significant capital available. Recently, Brown & Brown’s BRO subsidiary Hull & Company, LLC acquired considerably all of J.E. Brown’s assets.

Price Performance

Shares of the insurance broker have gained 20.8% in a year, outperforming the industry’s growth of 2.7%. Efforts to ramp up its growth profile and capital position should help shares bounce back.

Other Stocks to Consider

Some other top-ranked companies in the insurance industry are eHealth EHTH and First American Financial FAF, each sporting a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

eHealth surpassed estimates in each of the last four quarters, with the average being 83.27%.

First American surpassed estimates in three of the last four quarters, with the average being 16.83%.

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