It’s been a busy start to 2017 for Ryan Specialty Group (RSG) – the firm has snapped up Trident Marine Management, Interstate Insurance Management as well as two other outfits through its Swedish and Danish operations.
RSG’s founder and CEO, Patrick Ryan, said the decision to buy Trident and Interstate was based on the complex space they occupied.
“They’ve got tougher risks - we like to be engaged in working in lines of businesses where you can differentiate yourself, differentiate your expertise,” Ryan said, referencing Trident’s energy and marine specializations on top of Interstate’s trucking focus.
The strategy adopted by RSG is driven by wholesale or retail brokers who ask the company for facilities and specialty lines, Ryan said.
“In energy, you’ve got a range of risks that the energy companies incur making it a fertile ground for creativity and specialization,” he explained. “Interstate in truck is the same principle. Trucking and commercial auto are very complicated risks and are topically difficult.”
Ryan advised insurers put considerable planning into their M&A strategy.
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“They should really have a well-defined strategy that they stick to. We stick to our strategy religiously. We don’t look to grow as a result of acquisitions alone, it’s very important for every business to grow market share organically,” Ryan said.
“We blend acquisitions with that organic growth to increase our market share, to increase lines of business, our geographic coverage and new specialty lines.”
There were three priorities Ryan listed insurers should take into account when looking at acquisitions.
“You can’t just say ‘I want to grow through acquisitions,’ because, historically, acquisitions do not work. Strategy first,” Ryan said, mentioning RSG made no purchases in 2014 because there weren’t any fits.
“Secondly, and critically is culture. It has to be a cultural fit. You can find a wonderful business that fits your strategy but the cultures clash. Particularly with a professional service business like an insurance broker or an underwriting business: cultural fit is critical.”
RSG won’t buy a company if the strategy makes sense but the cultures aren’t aligned, Ryan said, adding that “scale” and “accretion” aren’t reason enough for growth.
“We bring in cohesive solutions to our clients. It’s so important the cultures fit because, if not, we’re not going to have cohesiveness,” Ryan said.
“The third is price, it always comes after the first two. With price, you just have to factor in your return.”