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On Tuesday, Truist Securities maintained its Hold rating on Arthur J. Gallagher & Co. (NYSE: AJG) with a price target of $275.00. The firm highlighted the insurance broker's recent announcement of its intent to acquire AssuredPartners.
The transaction, valued at $13.45 billion—or $12.45 billion net of an estimated $1.0 billion deferred tax asset—is anticipated to close in the first quarter of 2025, pending regulatory approvals. InvestingPro data shows AJG maintains a GOOD overall financial health score, suggesting strong capability to execute such significant acquisitions.
Arthur J. Gallagher's acquisition represents an EBITDAC multiple of 14.3x, which drops to 11.3x when considering the deferred tax asset and projected synergies of $160 million. This valuation is noted to be significantly lower than Gallagher's own 2024 EBITDA multiple of 21x. Notably, the deal will be executed without Gallagher assuming any debt or paying earnouts.
The price target set by Truist Securities is based on a multiple of 17.7x the firm's estimated EBITDA for 2025. This reflects a target price-to-earnings (P/E) multiple of 24.6x based on the anticipated earnings per share (EPS) for the same year.
Arthur J. Gallagher's strategic move to acquire AssuredPartners is expected to strengthen its market position. The acquisition is one of the largest in the company's history and marks a significant expansion of its operations and service offerings.
The transaction is set to enhance Gallagher's capabilities and is projected to deliver substantial synergies. The estimated $160 million in synergies is expected to contribute to the company's financial performance post-acquisition.
In other recent news, Arthur J. Gallagher & Co. is making significant strides in its growth strategy through acquisitions and strong financial performance. The insurance brokerage firm has entered into a definitive agreement to acquire AssuredPartners for a gross consideration of $13.45 billion. This acquisition is expected to enhance Gallagher's property and casualty offerings across the United States. Additionally, the company has acquired Shepard Insurance Group, which will expand its high-net-worth offerings in the Northeast and also secured THB Chile, further bolstering its international presence.
These acquisitions are part of Arthur J. Gallagher's broader strategy to expand its market presence and service offerings. The company reported a 13% increase in revenue across its Brokerage and Risk Management segments. Analysts project the Brokerage segment to achieve 6% to 8% organic growth in 2025, and the Risk Management segment to have 7% organic growth for Q4 2024.
On the analyst front, Goldman Sachs recently adjusted its stance on Arthur J. Gallagher, moving it from a "Buy" to a "Neutral" rating. In contrast, BMO Capital Markets raised their price target for the company's shares to $325.00 from the previous $312.00, citing expectations of higher growth from both inorganic and organic strategies.
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