Press Release

Arthur J. Gallagher & Co. Announces Agreement To Acquire Buck

Issued by Arthur J. Gallagher & Co.

Dec. 22, 2022

ROLLING MEADOWS, Ill. -- Arthur J. Gallagher & Co. (NYSE: AJG) today announced an agreement to acquire the partnership interests of BCHR Holdings, L.P., dba Buck.  The transaction is expected to close during the first half of 2023, subject to customary regulatory approvals.

Buck is a leading provider of retirement, HR and employee benefits consulting and administration services. The organization has a long history, dating back more than 100 years, with a diverse client base by both size and industry. With over 2,300 employees, including more than 220 credentialed actuaries, Buck primarily serves customers throughout the US, Canada and the UK. 

"Providing a comprehensive suite of products and services that allows employers to attract, engage and retain talent is at the heart of Gallagher Benefit Services' mission and our global Gallagher Better Works value proposition," said J. Patrick Gallagher, Jr., Chairman, President and CEO. "Through the complementary strengths of Buck's defined benefit offerings, investment consulting, digital employee engagement platform and international footprint, the acquisition will broaden, deepen and enhance our client offerings. I look forward to welcoming the 2,300 new colleagues joining us as part of this transaction to our growing Gallagher family of professionals."

Benefits of the acquisition are expected to include:

• Expanding Gallagher's value proposition within retirement, benefits & HR consulting, administration, and technology
• Enhancing and deepening Gallagher's broad suite of professional services including: defined benefits consulting, plan administration, defined contribution and executive benefit consulting, investment consulting, benefits strategy, compliance, employee engagement  consulting and total rewards optimization
• Adding "bSuite," a leading, proprietary software platform for benefits administration and employee engagement
• Potential cross-selling opportunities across current benefits and property & casualty clients
• Combining similar sales cultures, both focused on outstanding client service, employee engagement and innovation
• Deepening the employee benefits management team.

Financial Terms Under the agreement, Gallagher will acquire the partnership interests of BCHR Holdings, L.P. and its subsidiaries, for a gross consideration of $660 million or approximately $585 million net of agreed seller funded expenses and net working capital.  Gallagher expects to fund the transaction via free cash flow and short-term borrowings.  The transaction is estimated to be approximately 2% accretive to adjusted diluted earnings per share over the trailing twelve month period ended September 30, 2022, assuming expense synergies discussed below. 

Prior to expected expense synergies of approximately $20 million, Buck's pro forma adjusted trailing twelve month revenues and EBITDAC ending September 30, 2022 were approximately $280 million and $34 million, respectively.  Including synergies, the purchase multiple is approximately 10.8x of trailing twelve month September 30, 2022 pro forma adjusted EBITDAC, or 13.1x including expected integration expense of approximately $125 million.  

About Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. (NYSE:AJG), a global insurance brokerage, risk management and consulting services firm, is headquartered in Rolling Meadows, Illinois. Gallagher provides these services in approximately 130 countries around the world through its owned operations and a network of correspondent brokers and consultants.

Information Regarding Forward-Looking Statements  This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to expectations or forecasts of future events and use words such as "anticipate," "believe," "estimate," "expect," "contemplate," "forecast," "project," "intend," "plan," "potential," and other similar terms, and future or conditional tense verbs like "could," "may," "might," "see," "should," "will" and "would." Examples of forward-looking statements in this press release include, but are not limited to, statements regarding the expected timing of the completion of the Buck acquisition, the benefits of the proposed acquisition with respect to our client offerings and value proposition, among other expected benefits, the expected consideration to be paid, the expected revenue, EPS and EBITDAC impacts of the acquisition, the expected expense synergies, required regulatory approvals, the expected expense of integration, and the anticipated methods of financing the acquisition. Forward-looking statements are not guarantees of future performance and they involve risks, uncertainties and assumptions.  Our future performance and actual results or outcomes may differ materially from those expressed in such forward-looking statements. Many of the factors that will determine these results are beyond our ability to control or predict.  Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of, and are based on information available to us on, the date on which they are made.

Such risks and uncertainties that could cause actual results to differ materially from our published expectations include, among others, (a) risks related to the integration of Buck into our company; (b) the possibility that the proposed acquisition is not completed when expected or at all because required regulatory approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all; (c) the risk that our free cash flow is insufficient, or the financing required to fund the proposed transaction is not obtained on the terms anticipated or at all; (d) potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the acquisition; (e) the possibility that the anticipated benefits of the acquisition, including expense synergies, are not realized when expected or at all, including as a result of the impact of, or issues arising from, the integration of the acquired operations into our company; (f) the possibility that the acquisition may be more expensive to integrate than anticipated, including as a result of unexpected factors or events; (g) diversion of management's attention from ongoing business operations and opportunities; (h) the inability to retain certain key employees of the acquired operations or Gallagher; (i) competitive responses to the acquisition; (j) uncertainties as to the timing of the completion of the acquisition and the ability of each party to consummate the acquisition; and (k) additional factors discussed in the section entitled "Information Concerning Forward-Looking Statements" in Gallagher's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 and "Risk Factors" in Gallagher's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and any other reports we file with the SEC in the future.

Any forward-looking statements speak only as of the date that they are made, and we do not undertake any obligation to update any such statements or release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect new information, future or unexpected events or otherwise, except as required by applicable law or regulation.

Non-GAAP Measures  This press release includes references to Adjusted EBITDAC, which is a measure not in accordance with, or an alternative to, the GAAP information provided herein. Gallagher believes that Adjusted EBITDAC, as defined below, provides a meaningful representation of its operating performance and improves the comparability of Gallagher's results between periods by eliminating the impact of certain items that have a high degree of variability. EBITDAC is defined as net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables. Adjusted EBITDAC is EBITDAC adjusted to exclude net gains on divestitures, acquisition integration costs, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, legal and income tax related costs and the period-over-period impact of foreign currency translation, as applicable. The most directly comparable GAAP measure is earnings from continuing operations. Please see "Reconciliation of Non-GAAP Measures" on Gallagher's website at www.ajg.com under "Investor Relations" for the purpose of this measure.

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