"Wherever there are great brokerages, we see great opportunity"

M&A leader talks growth plans and key considerations

"Wherever there are great brokerages, we see great opportunity"

Mergers & Acquisitions

By Terry Gangcuangco

Ontario-based McDougall Insurance, which enjoys the backing of Definity Financial Corporation, has been on a steady path implementing its growth plans. Its recent acquisitions include All Time Insurance Brokers and deals made through its Alberta division.

Here, Lorne McDougall (pictured), who leads the company’s mergers and acquisitions (M&A) strategy, shares with Insurance Business how the brokerage is carrying out an effective balancing act while it continues to grow.   

Insurance Business: While already Ontario’s biggest broker, what are the current growth targets for McDougall Insurance?

McDougall: Our singular focus is on customer service – and we strongly believe scale is the best way to drive improved service within our industry. So, we are open to grow anywhere, whether it is in our backyard in Ontario or new provinces like what we’ve done in Alberta. Wherever there are great brokerages, we see great opportunity.

IB: McDougall’s operating unit, Drayden Insurance, is busy with its own acquisitions – what has been the most significant impact following your swoop for Drayden?

McDougall: We have been incredibly impressed with our Team Alberta, with our leaders in Drayden (and also our recent acquisition MHK) stepping up in big ways to enable us to grow aggressively in Alberta. One of the things we strive to be the best at is empowering our operating divisions – and certainly M&A is one way we’ve delivered on that for Drayden and team.

I don’t think we realized when we first looked at the province how open it would be to our business model as a consolidator, and we love doing business in the province. Coincidentally, I’m also now a way bigger Oilers fan than I was two years ago.

IB: As M&A lead for MCDougall, what do you look for in potential deals?

McDougall: The most important thing is culture. We are big believers that deals with firms and leaders that culturally align with us end up being low-stress, win-win propositions for everyone involved. And although we are certainly capable of conducting an acquisition and fully assuming control, we love opportunities where our role is to augment, not supplant existing leadership.

We crave partners who want to build something with us – and we’ve done many deals where vendors roll over a substantial amount of their current ownership into our firm, which has delivered great results to all parties again and again and again. Beyond the qualitative, of course financial results are crucial – but it’s not just the top and bottom lines. Retention, loss ratios, employee turnover – there are many ingredients that make a perfect brokerage, and we look at them all.

IB: What would you say is the biggest challenge for a growing brokerage in the Canadian insurance market?

McDougall: One of the best things about our industry is also its greatest challenge – it’s all about relationships and people. Every broker knows how hard it is to get the right people – and growth compounds that challenge as you need people to take on ever-increasing responsibility. And to execute on growth while keeping your relationships positive, especially with your insurance carriers, requires intense effort and discipline.

Ultimately, we continue to focus on win-wins (astute readers will notice a bit of a trend), where our employees and our carriers can succeed despite (or because of) our growth.

IB: In your view, how is broker consolidation affecting the sector? 

McDougall: We see consolidation as largely positive for the industry. As I mentioned at the start, scale improves customer service – and the better customers are served, the better off we as an industry are. With American hands already deep into our sector, the more competitive the Canadian-owned and -operated brokerages can be, the better it is for Canada – and consolidation helps with that.

It has also helped facilitate a changing of the guard: from on the one hand a generation of leaders putting the finishing touches on their lifetime achievements, and on the other a hungry generation keen to earn their stripes and take our industry to the next level. Finally, the consolidation certainly has pushed the value of brokerages to hard-to-imagine heights – and although it would be incredibly helpful to us if we could all quit it, I don’t foresee that trend reversing anytime soon.

IB: There are plenty of consolidators in the industry already – why is McDougall throwing its hat into the ring?

McDougall: This is the main question we considered before we did our deal with Definity – what can we bring to the market that isn’t already done? Ultimately, our answer is “Goldilocks.” We balance a number of factors which no-one else in the industry can bring. We have access to incredible financial strength and organizational support through Definity but retain our own ability to run our brokerage and choose where policies are placed with our clients.

We are one of the largest brokerages in Canada, but we are headquartered in Belleville, Ontario (population 50k) and have retained that small-town earnestness and community focus. We can do a deal and immediately take steps to help existing staff and elevate customer service, but we aren’t going to close offices, and we give existing leaders space to lead (and opportunities to own). Not too hot, not too cold, just right – so far, it’s worked!

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