Brown & Brown(US:BRO) Goldman Sachs·2025-06-11 05:45Investment Rating - The report assigns a Neutral rating to Brown & Brown Inc. (BRO) since May 13, 2025, with a current price of $105.49 and a target price of $119.00, indicating an upside potential of 12.8% [8][34]. Core Insights - The acquisition of Accession Risk Management Group for approximately $9.825 billion is expected to enhance BRO's scale and accelerate its revenue growth towards an intermediate goal of $8 billion [2][20]. - The deal is projected to close in the third quarter of 2025 and is anticipated to generate synergies of around $150 million by 2028, which will improve BRO's diversification and reduce its exposure to property catastrophe risks [1][20]. - The acquisition is expected to be accretive to BRO's earnings per share (EPS) by approximately 8% to 13% in 2026, driven by additional earnings from Accession and cost synergies [21][22]. Summary by Sections Acquisition Details - BRO announced the acquisition of Accession for a total consideration of $9.825 billion, which translates to a multiple of approximately 15.7x on Accession's 2024 adjusted EBITDAC [1]. - The deal is expected to close in Q3 2025, with BRO having already cleared the necessary antitrust waiting period [1]. Strategic Rationale - The acquisition aligns with BRO's strategy to gain scale in the U.S. retail P&C brokerage and employee benefits sectors, enhancing its presence in the middle-market segment [2]. - Accession's business model and geographic focus are similar to BRO's, which is expected to facilitate integration and operational synergies [2][30]. Financial Projections - The report provides financial forecasts for BRO, including adjusted net income estimates of $1.1 billion for 2024, increasing to $1.475 billion by 2027, with corresponding EPS growth from $3.86 to $5.18 [3][14]. - The expected revenue growth for Accession in 2025 is projected at 9%, with a slowdown anticipated from 17% growth in 2024 due to market conditions [24][19]. Valuation Metrics - The implied EV/NTM Adj. EBITDAC multiple for the acquisition is estimated to be in the range of 13.1x to 14.9x, which is competitive compared to industry peers [18][26]. - BRO's financial ratios indicate a P/E ratio of 24.2 for 2024, decreasing to 20.4 by 2027, reflecting a positive outlook on earnings growth [3][9].