AJG: Low Drama Update; Minor Estimate Revisions & Price Target Unchanged

Research evidence excerpt

AJG: Low Drama Update; Minor Estimate Revisions & Price Target Unchanged

ll in April,

completing 6 mergers since then with $55m of revenue). They commented their pipeline remains

strong and full of tuck-in M&A opportunities around the globe that could contribute to long-term

strategic growth. They currently have 40 potential mergers representing around $600m of annualized

revenue within the pipeline (this is higher vs $400m as of their Q1 earnings call). Management

highlighted they continue to have close to $10b to fund deals over next two years but did say that

the change in public market multiples is perhaps pushing out deals (as shown by the larger revenue

in its pipeline). So far into the quarter, AJG has repurchased $170m shares, after buying back $310m

in Q1. AJG noted the share repurchases in the quarter were opportunistic, as, although they believe

their equity in undervalued by the market, their longer-term priorities remain unchanged as they look

to invest in organic growth, remain active in M&A opportunities, and stay disciplined in their pricing

around deals.

AP deal synergies + revenue growth: The company continues to expect $160m of synergies on a run-

rate basis by YE2026 but now expect $325m by early 2028, which is better than prior $300m guide,

and original $160m. AJG continues to see modest changes to AP revenue (Q2/Q4 down by $15m

each) with EBITDA unchanged. While Q4 revenue of $720m implies 2.3% growth vs last Q4 this is not

necessarily organic due as they adjust revenue as they understand more of their commission structure.

Cost savings from AI: AJG reaffirmed some cost savings that they could see from AI including: (1) 5%

savings in production layer costs (which typically total around 20% of revenue), (2) 10-15% of support