SANTA ROSA -- Vantreo Insurance Brokerage has acquired Hodges Insurance Services, an independent agency run by longtime Santa Rosa employee benefits specialist David Hodges, in a move that reflects increasing consolidation among smaller brokerages in the professional services sector.

The acquisition, closed June 1, will bring Mr. Hodges and his four-person team under one roof at the larger Vantreo, which in turn will be able to double its employee benefits offerings to its client base, said Lynne Wallace, president of Santa Rosa-based Vantreo. Terms of the deal were not disclosed.

"I honestly think it's very much a cultural fit," Ms. Wallace said. "We've been friends and friendly competitors for years. We're much more of a force together than we are alone."

Mr. Hodges, who has run his own agency since 1985,  said he had no intention of merging his operation until recently, when a national carrier approached him and asked if he would run a local branch for the company. He declined, but shortly afterward, he said he approached Ms. Wallace, who he has known for many years, to get her thoughts on the matter.

After much discussion, and numerous other suitors, Mr. Hodges said he decided Vantreo was the best fit, given its local ties and its ability to offer more options for his several hundred clients. He also said a growing list of his clients were asking him to carry all lines of their business insurance, from workers compensation to property-casualty, but that he had never intended to move away from employee benefits. Now, with Vantreo, he said his clients can get that broad expertise in all lines of insurance, while he will still focus exclusively on employee benefits.

"I think we're going to be stronger," he said. "When it came down to it, the local Santa Rosa element drew me in."

Vantreo has seen significant growth over the past year, particularly in employee benefits. In 2010, it had $10 million in North Bay premium volume and was ranked 14th on the North Bay Business Journal's Employee Benefits list. In 2011, it had $18 million in North Bay premium volume and jumped up to the ninth spot on the same list. And Ms. Wallace said Vantreo went from annual revenues of $3.6 million in 2007 to $6 million this year.

That growth appealed to Mr. Hodges as he weighed his options. "Frankly, they're growing at a pretty rock-'n-roll pace," he said. "It's jumping, and that's some place where I fit in."

Hodges Insurance Services had $7 million in North Bay premium volume in 2011.

On the property-casual side, Vantreo went from $45 million in North Bay premium volume in 2010 to $62 million in 2011, making it the second biggest independent property-casual agency in the North Bay.

The pace of mergers and acquisitions in the professional services industry has accelerated recently, often with larger, national corporations looking to snatch up smaller companies with established client bases.

“The main driver of merger and acquisition activity in the financial services sector revolves around two things -- first of all to provide more diverse product lines and personnel depth for the company that is the buyer, and next, for the company being acquired, a soft landing and an exit strategy for his or her company,” said Jim Andersen, partner in the consulting and business valuation practice group of Burr Pilger Mayer in Santa Rosa.

The insurance industry is no different, and much of the consolidation is being driven by health care reform, particularly as states aim to set up health insurance exchanges that could effectively price some of the smaller brokerages out of the market, Mr. Hodges said.

"To be frank, anybody in my business, they're all feeling the exact same way -- we have a big target on our backs," he said. The exchanges, as purposed in California, would offer businesses a window to shop for health insurance needs, but would not require them to be run by licensed brokers. That could drain business away from established brokers.

Vantreo's acquisition of Hodges is not the first example of a smaller, yet influential, brokerage aligning with a larger entity in the North Bay. Mr. Hodges said the situation is similar to when another longtime Santa Rosa broker, Victor McKnight, moved to Edgewood Partners Insurance Corp., or EPIC,  in Petaluma after his former employer, Sitzmann Morris & Lavis, was acquired by national carrier Brown & Brown.

Ms. Wallace said she's seen the trend as well, but noted that the combination of Hodges and Vantreo will make a local company even stronger amid challenging economic conditions, a point Mr. Hodges echoed.

"Good companies are dying, great companies are surviving, but it takes an excellent company to thrive," she said. "This partnership is an example of that. It's going to bring that excellence. For us, it was really a natural partnership."