The pace of brokerage mergers and acquisitions (M&A) isn’t expected to abate any time soon, with at least one industry expert seeing global consolidation set to accelerate.
Huge capital inflows into insurance over the last few years have given M&A activity momentum, according to Peter Blanc (pictured below), head of M&A at Howden Group Holdings, one of the world’s largest independent (re)insurance brokers.
“Howden is now the 12th biggest broker in the world, but the 11 that are bigger than us are all in the US, and half of those are private equity-backed and only in the US,” Blanc said, noting there were “about 60,000 to 70,000 broking firms of size” worldwide.
“So, we see trends with US brokers inevitably coming to Europe. We see lots of UK consolidators looking to Europe and in every country around the world.”
Blanc shared his prediction at the Women in Insurance Summit in London on Thursday (November 30) on a panel about market trends and competitive intelligence.
Reaching across borders isn’t a simple task, even for the most acquisitive brokers. A strong awareness of different M&A market dynamics is crucial to success, according to Blanc.
“I don't believe that anyone in London can go to any other country and tell them how to do consolidation. I think where that's been tried in the past, it inevitably doesn't go well,” he said.
“Someone from France wouldn’t rock up in England tomorrow and think, ‘I'm going to try buying brokers.’ There's a level of awareness of the market that you have by trading in it for many, many years.”
Howden’s M&A strategy is to find leaders in each country to take the lead and empower and support those leaders to go and build their businesses, Blanc added. Entering a new market via an established partner can also facilitate smoother relationships with local stakeholders.
“There’s a different level of maturity of consolidation, where in some countries it’s only started and other countries where it's finished,” Blanc said.
“Our job is to try and pick the ones that are on that journey, try to make a good return for our shareholders along the way, and to create a global powerhouse.”
Blanc also shared his thoughts about the pace of growth among insurance brokerages and how the competitive landscape has shaped insurance M&A activity.
“If you're a shareholder of a large broking firm, you're looking to grow and increase your profits and revenues. By far, the cheapest way to do it is organic. But as everyone in the room probably knows, organic is pretty hard yards, and often relatively slow,” he said.
“Insurance is one of the stickiest of purchases, so to grow quickly, acquisition is often the best way. The trend of that is not showing any signs or stopping.
“If anything, COVID has accelerated it, because during the pandemic, lots of industries suffered terribly, but insurance and insurance distribution did incredibly well. As a result, virtually every private equity fund around the world is looking at insurance thinking, ‘I want to be in that.’”
Do you agree that global consolidations will accelerate in the brokerage space? What are your thoughts on this story? Tell us in the comments.