In an earlier report, top accounting firm Deloitte said the outlook for this year’s insurance mergers and acquisitions in Australia appeared strong due to a number of factors. Here Insurance Business picked the brain of Ethos Broking Australia chief executive Adrian Kitchin (pictured) to find out what’s happening in the world of insurance M&As.
“The arrival of offshore investors is driving momentum in the market which provides additional choices for business owners who may be considering a sale,” noted Kitchin.
“Rather than simply the financial side of the transaction, which of course remains important, potential vendors are also considering who will make the right partner for them over the long term, particularly those who wish to work on as a continuing shareholder.”
In Deloitte’s 2021 insurance M&A outlook report, the company pointed to these offshore investors, which are spicing up the market, competition-wise.
The 30-page document reads: “Due to the fragmented nature of the brokerage market in Australia, ongoing sector consolidation is expected to continue driving M&A activity in 2021. Listed local participants AUB and Steadfast continued to protect and expand their market share with offensive M&A to drive volume, capture more of the insurance value chain, and achieve economies of scale.
“We expect to see heightened competition in the Australian market for brokerage acquisitions following the entry of offshore players and PE (private equity) investors.
Outside broking, Deloitte also highlighted the divestment and simplification initiatives that were being undertaken by the country’s major lenders. The sale of banks’ insurance businesses significantly contributes to the industry’s M&A activity.
But how has the coronavirus crisis impacted, and continued to influence, deals?
Kitchin told Insurance Business: “Insurance remains a very resilient business; however, there is no doubt that the pandemic has brought with it additional stress, particularly in smaller businesses who are constantly needing to adapt to the changing landscape. For some, this has accelerated their plans for retirement and the sale of their business.”
“The speed of the roll-out of the COVID vaccines will certainly have an effect in terms of ongoing fatigue for some business owners,” added the CEO.
“As we come out of COVID, the next stage of the Royal Commission will figure in planning for all brokers in 2022 and beyond and, like the pandemic, may bring forward plans for some business owners to undertake a partial or complete sale of their business.”