The Takeaway: A Q&A With James Anderson on the Insurance and Wealth Management Sectors

What do investors like about the insurance and wealth management sectors?

There are a number of characteristics that investors find attractive. First, the insurance and wealth management sectors are huge markets with many opportunities and potential targets.

Second, they are not particularly correlated with normal economic cycles. Oftentimes when many other sectors are not performing, these sectors remain steady.

In addition, both have been consistent growers over time, they are not particularly capital intensive, and their revenue is incredibly sticky; once you get a customer, they tend to stay with you for a long time.

From an M&A perspective, there’s substantial growth potential. There are just so many opportunities to buy and consolidate—both insurance services and wealth management businesses can be lucrative consolidation plays for private equity firms.

Are the sectors especially attractive to sponsors these days?

I would say, in both sectors, the platforms are predominantly sponsor-backed, with relatively few public companies in these spaces. Even the very large platforms tend to be sponsor-owned, often with multiple sponsors in the cap table. For the reasons I mentioned, these sectors have been fertile ground for sponsors for the better part of almost two decades.

Interesting. When Houlihan Lokey first announced the acquisition of Waller Helms, one of the themes we heard was, “Every asset manager wants to own an insurance company and vice versa.” Is that a big theme these days?

That’s fairly accurate. I don't know if it’s going to be “everyone,” but certainly, that is the case from a life insurance perspective because most of the business of life insurance is investing the premiums that you hold, often for decades. So that is something we’ve observed over time. And we see that going the other way as well, with asset managers buying insurance businesses to gather those assets.

What are the biggest opportunities you’re seeing in those sectors right now?

Well, I think when you look at the businesses in those sectors, the insurance space is going to remain very robust and consequently attractive. The world needs insurance, and the world is growing more complex with risks growing larger, more frequent, and more complex. Those factors have the effect of spawning innovation within the industry, which creates opportunities for new products and growth.

On the wealth side, what many of these businesses have learned is that scale matters, whether you’re talking about access to products or access to talent. You need to be bigger in order to be relevant these days, and it’s critical to be expense-efficient. That also creates opportunity.

The equity bull market over the past four years has been a terrific tailwind for the sector as well. Multiply that with the dynamic of private equity firms wanting to own these platforms, and it has been a recipe for not only a lot of deal activity but also for company values. Multiples are expanding, and maybe outside of AI, this is probably one of the hottest areas in all of M&A.

Taking a little bit of a look outward, are there any headwinds or potential wrenches in the works, or does the current fact set regarding the sectors and the broader economic environment suggest a healthy 2025?

I would say that we’re expecting a fairly robust year of activity in 2025. Certainly, as we look at the macro backdrop for both of these sectors, the one potential hiccup is if the equity markets reversed—that could be cause for pause, certainly in the wealth management space, because so much of their fees are based on assets under management. If those assets start to shrink, that may be a bit of a headwind, but right now we appear to be “all systems go.”

Last question: What excites you most about the combination of Waller Helms and Houlihan Lokey?

I would probably say one, just within the Financial Services Group itself, we have doubled our scale in the market, and the combined platform has sector coverage that each firm did not have previously. The Waller Helms team brought substantial insurance and wealth management expertise, but Houlihan Lokey is dominant in sectors like specialty finance and mortgage services. It’s very compelling. The second piece is the capabilities we can now bring to our clients, with Houlihan Lokey’s Financial Sponsors team and the Capital Markets Group—those are just going to allow us to offer even more solutions to our clients. Culturally, it has been seamless, so it’s just a terrific combination.