And when you take a look at our pipeline, we gave you some numbers today. I mean, it’s just incredibly robust.
Jon Newsome: And then completely shifting to a different topic, if I could. There’s been some comments this quarter, I think about the shift back and forth between excess lines and especially in the standard carriers. And I was wondering if from your perspective, you’re seeing any of that shift back to the standard carrier. Is there really anything that’s major from a terms and conditions environment sort of excluding pricing?
Patrick Gallagher: No, we’re not. I mean, the stuff that’s in the E&S market has gone there for a reason, and that is growing every single month in terms of 15%, 20%. Our submissions at RPS are up substantially this year. We measure that every day, frankly. And our submissions into RPS, our wholesaling operation, are at an all-time high. Property, in particular, is a big driving line for sure, and there just is a lack of capacity, and it is getting — it continues to be — whoever can tell the best story might just get a quote. So no, I’m not seeing — and we are not seeing terms and conditions soften while things still stay in the excess market. And we’re not seeing business flow back to the primaries.
Operator: Our next question comes from the line of Greg Peters with Raymond James.
Charles Peters: Pat, I feel like you have been saying you feel like you’re just getting started for over 20 years now. So I guess no change there. Can we go back to your comments on the bank acquisitions. And I think you said some of the banks Cadence and Eastern are getting solid high multiples for those businesses. I think those were your words. And I look at the CFO commentary, and it looks like the — you’re — inside that you’re looking for — your multiples are paying are 10 to 11x EBITDAC. Is that inclusive of Cadence and Eastern because it feels like those numbers were — multiples for those businesses were a little bit higher.
Douglas Howell: Yes. Typically, what we do is for a larger transaction like that, and we have a couple of — 1 a year or something like that, we typically exclude that. The purpose of that disclosure is really showing you what we’re seeing in the tuck-ins. The reality is, is we’re still seeing great opportunities, a little north of 10x, maybe sometimes you get 1 at 12, some at 10. But there’s a really — there’s a ton of tuck-in opportunities that are still realizing there’s terrific value in that 10% to 12% range. And the reason why is they understand that they have careers inside of Gallagher afterwards. Their employees and their producers and themselves have great careers inside of Gallagher. So what a terrific thing? Sell your business at 10 to 12x, come in and work, take on increasing responsibilities, double your agency or your location.
So the reason why we can still be effective buyers at 10 to 12x is the future opportunity of getting better together. We set it for 20 years since I’ve been here. When 1 plus 1 is equal 3, 4 and 5, that’s what they’re seeing. So we continue to click those off day in and day out kind of in those multiple ranges.
Charles Peters: Okay. That makes sense. And then on those — the larger transactions, it doesn’t seem like — maybe I’m — I don’t know the answer. So is there a lot of synergies to be harvested from as you integrate the businesses? Or are the stand-alone teams sort of like what you got with the WTW reinsurance operations.
Douglas Howell: I think with Eastern and Cadence, I mean, it’s not a — there’s no — there’s very few human synergies to be gained on this. As a matter of fact, they do a really great job servicing their customers and selling the insurance. But there are efficiencies that can be gained through a common general ledger, a common agency management system only needing 1 cyber protocol that runs over your platform. So there are some synergies there. But those are in the $3 million, $4 million, $5 million type numbers, not in the $25 million, $30 million or $40 million type number.
Patrick Gallagher: The real kicker there, Greg, is that look at these bigger deals run by banks, and this is why we say it very much feels like we’re buying somebody similar to us. These are firms that were rolled up by the bank, typically good community people. I’ve heard 3 separate outreaches from Cadence people in the last 2 days that I’ve known in 1 instance that they came in to kick the tires with us in 1998. And I remember the guy wrote to me and he goes, “Hey, I came with Shorty and I remember Shorty and I came with Jim, I remember Jim and I can’t tell you how excited we are.” Now what we’re bringing to them that Cadence could never do is that whole discussion of moving upstream. We can show you statistically that our closing rate on bigger deals, and I’m not talking risk management, huge accounts.
I’m just saying the bigger deals that are generating over $125,000 to $150,000 of commission are significantly greater today than they were 5 or 10 years ago. This is what we’re giving them the opportunity to go after. They’re typical agents in these banks that look just like everybody else, and now they’re going to go out. And frankly, they’re going to have our tools and they’re terrifically excited about it. So that’s, I think, the whole synergy thing. This is not take out headcount. This is turn them on, show them what we do, give them the tools and watch them eat the market all around them.
Charles Peters: Okay. That makes sense. I guess the final question, I know — I think it was Paul who was trying to get at this. But frankly, we’re hearing of some stress in some of the PE-backed roll-ups where the combination of higher interest costs and earn-outs are pressuring their free cash flow. What’s your view of some of those smaller entities that might be having problems? Could we see you be interested in some of those properties at some point in time if they should become available?
Patrick Gallagher: Well, here’s the thing. First of all, Greg, we’ll look at every single opportunity we can. And our first question every single time is what’s the culture. What was it that went into this group. In most of these, there are situations where we didn’t succeed in buying something they bought. Let’s talk about that around this table, not with them in the room. XYZ didn’t sell to us. Why is that? Okay, fine. What’s left there? And yes, I would say that there are some of those that we would be interested in. But we’d have to get through this whole cultural piece. When you chose not to join Gallagher, I’ll tell you the one main reason why you chose not to join Gallagher is because you didn’t want change. And our competition has done a very good job of saying, “Hey, why join Gallagher when I’ll give you the money?
I’m going to give you the cash, keep some in. Our returns have been terrific. You’ll get a second bite on the apple and you don’t need to change anything. You don’t need to change your name, you don’t need to change your agency system,” and while they’ve been doing that, we’ve been building power-to-power, data, analytics, capabilities and vertical strength. They’ve got none of that. And now it’s coming to roost with higher interest rates and tougher earnouts, and you got to make do — you got to come due on your promises. So yes, we’d look at them. But we’re going to have to fall in love.
Operator: Our next question comes from the line of Mike Zaremski with BMO Capital Markets.
Michael Zaremski: Maybe I missed this, but on the Cadence deal, is it — am I right looking at the revenue and EBITDA disclosure that Cadence has a 36% to 37% margin, which is pretty great. And then also on the deal there was — you called out tax benefits. I don’t recall you guys calling out tax benefits in the past.
