Thank you for standing by. This is the conference operator. Welcome to the BRP Group update conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Austin Rock, Director of Strategy and Partnerships. Please go ahead.
Thank you operator, and good morning, everyone. By now, everyone should have access to our partnership announcement and slide presentation, which were released prior to this call, and which may also be found on the investor relations portion of our website at baldwinriskpartners.com. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements which are based on the expectations, estimates, and projections of management as of today. The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties, and other factors that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them.
We refer all of you to our recent filings with the SEC, including our quarterly reports filed on August 13th, 2020 and May 13th, 2020, and our annual report on Form 10-K for the year ended December 31st, 2019, for a more detailed discussion of the assumptions, risks, uncertainties, and other factors that could impact the future operating results and financial condition of BRP Group, the partnership discussed on this call, or both, including those relevant to our completion and integration of this partnership and matters assessed in our due diligence of this partnership, as well as those related to potential effects of the COVID-19 pandemic on our business, financial condition, and results of operations.
On this call, we refer to the effects of COVID-19 and related government shutdowns, stay-at-home orders, business closures, travel restrictions, social distancing and other preventative measures, business disruptions, economic contraction, and COVID-19 related developments by generally referencing COVID-19 or the pandemic. We disclaim any intentions or obligations to update or revise any forward-looking statements, except to the extent required by applicable law. In addition, this call is being webcast and an archived version will be available after the call on the investor relations portion of our website. With that, I'll now turn the call over to Trevor Baldwin, Chief Executive Officer of BRP Group.
Thanks, Austin, good morning, everyone. We appreciate everyone taking the time to join us this morning on the back of the new partnership we announced yesterday evening with Insg roup, a middle-market firm based in Houston, Texas, ranked number 87 in Business Insurance's most recent list of top 100 brokers. I first want to warmly welcome our new colleagues, clients, and community stakeholders that come with the Insg roup partnership. We are thrilled and honored to be entrusted as the ideal partner and home for such a talented group of insurance professionals, very much look forward to growing together as we leverage the respective geographies, expertise, and capabilities of our newly combined platform.
During this call, I'll make a few brief remarks on the Insg roup partnership and our current pipeline, turn it over to John Valentine, our Chief Partnership Officer, to provide a more fulsome overview of Insg roup's business. To wrap up, Kristopher Wiebeck, our CFO, will provide a quick update on our pro forma financial position. Of course, at the end, we'll open the line up for Q&A. John will go into more detail on the business in a minute, we could not be more excited about the Insg roup team choosing to join forces with us. We have come to know their CEO, Brian Kapiloff, and his team extremely well over the last two years, they are a perfect embodiment of the type of firm we are looking to partner with.
The business has a tenured track record of growth, is established in one of the fastest-growing markets in the country, is led by a highly regarded and relatively young team that has chosen to buy in to the BRP vision via substantial role of equity, has fostered a strong client and colleague-focused culture very similar to ours at BRP. In aggregate, the partnership represents $38.5 million of annualized acquired revenue and $14.2 million of annualized acquired EBITDA, making it the largest new partnership in the history of our firm. The upfront EBITDA purchase multiple on the transaction is roughly 14x, which is a reflection of the quality of the business, its people, its scarcity value as a true platform in the Southwest region, strong history of growth.
As we've talked about in the past, a concept Kris will cover in more detail later in this call, this partnership features an earn-out structure that should the business meet certain meaningful growth targets, would deliver incremental consideration to the sellers, also lower our effective purchase multiple into the high single digits. Including this partnership, our 2020 year-to-date acquired annualized revenue, calculated as revenue attributable to acquired businesses for the most recent 12-month period, evaluated in the Quality of Earnings review prior to acquisition, now sits at $120 million. With still a little less than two months left in the year, importantly, we continue to maintain a robust pipeline we intend to execute on in the near term, remain in a strong financial position to do so. With that, I'll turn it over to John to provide a bit more detail on Insg roup's business.
Thanks, Trevor
To reiterate some of your remarks at the outset, we consider ourselves incredibly fortunate Insgroup has chosen to join us, and we're extremely excited to welcome their colleagues into our organization with open arms. Insgroup is a leading middle-market agency based in Houston, Texas, with offices in Dallas and Austin. For context, Texas is a market into which we've been actively looking to expand for quite some time. Houston and Dallas are the fourth and fifth largest metro areas in the country, and Houston is the fastest-growing top 20 MSA in the country in terms of net population growth over the last decade. Insgroup gives us a natural platform to build a meaningful business in Texas and across the broader southwest region.
Insgroup generated $38.5 million of annualized revenue in the most recent period evaluated through diligence, which excludes approximately $1.6 million of annualized revenue associated with acquisitions completed by Insgroup over the past 12 months. Insgroup has grown its revenue consistently over an extended period of time. In 2019, the company grew revenues by 31%. 63% of the company's revenues are derived from commercial property and casualty commissions and fees, with the balance coming from employee benefits and private risk solutions. Insgroup brings to BRP expertise across a number of industry verticals, including real estate, manufacturing, financial institutions, construction, and professional services. The company is also led by a world-class team.
To brag on Brian Kapiloff for a second, he was recently named a finalist for the Houston Business Journal's Most Admired CEO Award, and at just 50 years of age, he's got a long runway to play a meaningful role in helping The Baldwin Group reach our goal of becoming a top 10 broker in the U.S. over what is now the next eight years. Moreover, we're incredibly humbled by the vote of confidence that Brian and his team have taken in our collective future success via their substantial role of equity in this partnership. Equity consideration accounted for approximately 51% of all consideration. I would note that this is somewhat of an exception, and that for modeling purposes, we still believe that approximately 20%-22.5% equity consideration is a reasonable estimate for future partnerships on average going forward.
In summary, we're incredibly excited about our new partnership with Insgroup. We're excited to welcome the colleagues to our organization and about the many ways we complement the future growth of our relative businesses and the broader BRP platform going forward. With that, I'll turn it over to Kris.
Thanks, John. If folks look at page five of the presentation we posted to our investor relations website this morning, it's a quick reminder on how the combination of the earn-out structure we employ in our deals, plus the fast-growing nature of our partners, works to lower our effective purchase multiple as new partners continue to grow on the BRP platform. A quick refresher of what this table shows. In the first row, you'll see the aggregate total upfront consideration, revenue, EBITDA, and the implied EBITDA multiple of all 12 partnerships we've announced or completed 2020 year-to-date, which reflects an implied EBITDA purchase multiple of 12.5x. In the bottom row, you will see the same, taking into account earn-out, assuming all 12 of the partners grow at a compound annual growth rate of 25%.
Note, this is blended, not all earn-out structures for individual partnerships are the same. As you move towards the bottom of the table, the total consideration increases for the earn-out consideration earned, but revenue and EBITDA also increase to reflect the growth of those businesses on our platform. Thus, at the end of the earn-out period, we've effectively lowered our purchase price or purchase multiple to 8.2x. Do all partners always meet their full earn-out? No, but it's worth re-noting a stat we shared in our most recent follow-on offering, which is when analyzing all the partners that have been with us for at least a year, including the MGA of the Future, which is now included in organic growth, they have averaged 21% year-over-year growth in year one on our platform, or 11% if you remove the MGA of the Future.
Historically, we have results that are somewhere between the middle and the bottom of the table rather than the top. In addition to the multiple buy-down, it's also worth noting that the growth of new partners on our platform over the earn-out period effectively helps to partially fund the earn-out consideration through additional cash flow. To wrap up, a few quick comments on our pro forma financial position. After funding the cash consideration of the Insgroup partnership with a portion of the proceeds raised during our recent Term Loan B execution, we anticipate a pro forma net leverage ratio of approximately 2.4x.
Additionally, between cash on hand, our $400 million revolving credit facility, and the remaining proceeds from our Term Loan B, we estimate we have approximately $590 million of remaining debt capacity, which provides significant capital to continue to execute on our near-term pipeline and to be front-footed for the rest of this year and headed into 2021. With that, operator, please open the line for questions.
Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question is from Greg Peters from Raymond James. Please go ahead.
Good morning. I guess the first question would be, it looks like Insgroup, Inc. and their revenue growth is also a part of function of acquisitions, just trying to understand what the underlying organic result has been for the company, and especially in the last nine months of this year, which has been quite challenging, to say the least.
Yeah. Hey, Greg, this is Trevor. You are correct. The 31% growth number referenced does include some M&A that Insg roup had completed. However, one of the reasons we're so excited about the partnership with Ins is because we believe they have all the attributes and have historically generated organic growth at double-digit rates. We believe we'll be able to continue to generate organic growth at double-digit rates, really contributing towards our goal of delivering consistent and durable double-digit organic growth well into the future.
In some of your previous acquisitions, you've talked about the opportunities for cross-sell with some of your existing businesses. Can you talk about how BRP's existing footprint might help Insg roup grow even faster than what their current trajectory might suggest?
Yeah, absolutely, Greg. That is one of the many factors that gets us really excited about this partnership. To talk about a few, if you look at page four of the slide deck, on the bottom right-hand side, you'll see a breakout of commissions and fees by industry sector. What you'll see is the largest sector for Insg roup is real estate at roughly 36% of total commissions and fees. Similar to the Rosenthal partnership in Chicago, we see meaningful opportunity for synergy with the MGA of the Future renters product. In addition to that, our partnership from April with IRP, Paul and David Brown and their team who have really deep expertise in and around the energy sector.
If you look at Insg roup, they're based in Houston, where there's just massive energy industry sector, but only 2% roughly of Insg roup's revenues come from clients in the energy sector. We see a significant opportunity to grow into that industry over time. The Insg roup team really leveraging the expertise on our platform to do so. In addition to that, we both have really strong private risk management teams with national recognition. I think we'll see significant synergy and opportunity by combining those collective teams that enable us to really accelerate what we were each doing individually already.
Got it. The final question, just around consideration. In some of your other transactions, there's been an equity component, if you will. I'm curious, is this just cash or an earn-outs, or is there an equity component of the consideration here?
Greg, it's Kris. There's about a 51% equity component in the deal. Really the largest equity role we've done. I think it's special in that the structure of the seller was able to exercise the benefits of our LLC in the deferred rollover. It was a differentiator, I think, in our conversations. They, still being relatively young as a management team, were interested in partnering with us while also keeping a large equity piece. As John said in the call notes, we don't think you should take 51%, that's what it is going forward. We still think 20%-22.5% is the right average number, but this one is an outlier from that standpoint. We think justified given the prospects of what it's going to do for us in Texas, how strong that Texas market is even in this type of economy.
We're excited about it.
Just a follow-up to that point, what should I be thinking about diluted shares outstanding for the public company post-transaction? If they hit their earn-out targets, is there going to be more equity that's going to be offered, this is going to continue to grow the share count?
I think if you look at page six, we have a footnote for the equity rollover in terms of Class B shares and A shares. It's 3.7 million Class B and 150,000, roughly, Class A. I rounded a little bit there. There's more detail in the footnote. With all of our earn-outs, we always structure the ability to settle them in cash or equity. I don't think you necessarily can predict specifically additional dilution. We always retain the option to settle in both at the company's sole option.
Got it. Thank you for the answers.
Thanks, Greg.
The next question is from Meyer Shields from KBW. Please go ahead.
Great. Thanks. Good morning. Is there any meaningful difference in the commission rates that Insgroup collects with carriers that legacy BRP also does?
Hey, Meyer, this is Trevor. No, not significant. Maybe around the edges, but nothing that's going to have a dramatic impact.
Okay. Can you give us any sense as to how Insgroup has grown over the course of 2020?
Yeah. Insgroup has continued to deliver really outsized growth relative to the market, which is one of the reasons we are so excited about the partnership. They have a similar growth profile to our business, which is relatively unique and rare in this industry, particularly for a business of this size.
Okay. Just final question. You've talked a lot about their experience with M&A. Should we expect Insgroup's management to be involved in future M&A discussions, maybe throughout Texas, because it's a familiar market?
Absolutely, Meyer. I'd say even beyond. Brian and his team are going to run a new region for BRPs middle market business, and we're going to partner with them to grow that both organically and through partnerships. I think I would expect to absolutely see follow-on M&A as we continue to build out this region.
Great. Fantastic. Thank you so much.
Thanks, Meyer.
The next question is from Elyse Greenspan from Wells Fargo. Please go ahead.
Hi, thanks. Good morning. My first question, Insgroup seems to be, based off of your disclosure, I think running at a 37% margin. As you bring this deal on, would the expectation be that it would come on in about that margin? Are there any changes we need to be thinking about the margin as it's brought onto The Baldwin Group platform?
Sure. A couple nuances. When we publish Quality of Earnings of the revenue that we put in that slide deck, I think John also mentioned there's some revenue that hasn't fully lapped because they have done some little acquisitions in the year. I think you probably need to add a little bit of revenue to that number to get a margin. The margin ends up being a few points lower than that 37 if you were to run forward some of the M&A they've done that's not in their actual results yet. That's probably just the first part. I think to the second part, we definitely think this will be accretive to margin from a go forward basis. I think as we get to the earnings call next week, we'll probably provide a little bit more color on kind of estimates for go forward margin.
Okay, great.
Elyse, just to remind you, Elyse, that acquired revenue number that John mentioned on the call is $1.6 million in excess of the $38.5.
Okay, perfect. You mentioned in response to a previous question that this was showing growth similar to you guys. I am assuming that you are making that comparison to your middle market business. Obviously, you have shown strong growth throughout the platform, but the MGA of the Future has been pretty strong this year. When you were making that comment about, I think that was an organic or revenue growth comment, were you comparing that to kind of your BRP's core middle market business?
I would say it is comparable to BRP's core middle market business, which we still think is kind of multiples of where the traditional middle market is for our larger peers.
Okay, great. You guys started off the call by saying, I think making some high level kind of positive comments about the M&A pipeline. I know when we spoke to you last quarter, right, you had said exactly how it played out, right? There would be a little bit of a lull in the third quarter, and you thought the deals would pick up in the fourth quarter, getting close to the end of the year. Do you still see that? I know, is there any way you can give us a sense of just the pipeline of deals? Was there something unique that caused this deal to close now? Or is it kind of that everything related to M&A in terms of timeframe of transactions closing in the fourth quarter is playing out, like, in line with your expectations?
Elyse, as we noted in the press release, and in earlier remarks, we continue to have a robust pipeline on the partnership front that we intend to execute on in the near term. We will provide some more color on that next week in the earnings call.
Okay. That's great. Thank you for all the color.
Thanks, Elyse.
As a reminder, it is star one to ask a question. The next question is from Pablo Singzon of JP Morgan. Please go ahead.
Hi, good morning. Trevor, I noted that Brian from Insgroup will serve as the regional president for BRP. Should we take this appointment to be a preview for a build-out strategy in the middle market group? I guess does the long-term goal to appoint similar leaders in other geographies through deals with perhaps similarly sized or positioned partners?
That's right, Pablo. We already have Kelly Nash, who's the regional president in the Southeast for our middle market business. Brian Kapiloff is going to hold that similar role for the Southwest region. To the extent we have larger partnerships completed in the future, I think that would be a similar construct that we would approach it.
The next question is for Kris, just to follow up to Elyse's margin question, I guess I'll take it from a broader sort of angle here. A lot of your broker peers pulled back on expenses in 2020, making incremental margin expansion a little more challenging next year. You guys are clearly in a different position, right? You're growing much faster, perhaps making more investments today. I guess, can you just, without giving specific numbers, but I guess directionally, can you give us a sense on how you see your margins developing from where you are today and as you sort of ramp up with all these recent partnerships?
Pablo, appreciate the question. I think, given the proximity to our earnings call next Thursday, that's probably one that we should answer on that call. I think broadly, we continue to view that this is just a great environment for us to invest capital. Any kind of specific guidance that way should be answered next week.
Last for me, Trevor, I heard your comments on the multiple paid for Insg roup is more reflective of its unique characteristics. I guess I just want to get another better sense of how the pipeline is evolving here, because other brokers have seen a pickup in activity as well. Do you see competition for deals increasing, or do you think there's still enough deals coming to market that are allowing you to remain selective? Thank you.
Yeah. Hey, Pablo. As we said earlier, we maintain a very robust pipeline that we intend to execute on in the near term, and we plan to provide more color around that pipeline and the broader M&A environment next week on the earnings call.
Thank you.
This concludes the question and answer session. I would like to turn the conference back over to Trevor Baldwin for any closing remarks.
Thank you. We appreciate everyone dialing in this morning to hear about this fantastic partnership, and we look forward to speaking with everyone next week on our Q3 earnings call. Take care.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.