What's behind Ardonagh-Markerstudy mega-deal?

Leaders discuss their sizeable portfolio of brands, M&A, and a future IPO

What's behind Ardonagh-Markerstudy mega-deal?

Insurance News

By Gia Snape

Top executives from the Ardonagh Group (Ardonagh) and Markerstudy Group (Markerstudy) have given more details behind the mega-merger between Markerstudy and Atlanta Group (Atlanta), Ardonagh’s personal lines broking business.

The transaction announced Friday values Atlanta at £1.2 billion and will be funded by a new investment led by Pollen Street Capital and Bain Capital Special Situations.

“We saw this as an opportunity 12 to 18 months ago, in the midst of lots of things going on in the industry,” revealed Ian Donaldson (pictured left), CEO of Ardonagh Retail, at a media briefing. “There are so many synergies [between the two companies] and so many things that we do really, really well that we ought to realise those in this next phase. It’s an exciting opportunity for all of us.”

“It became even clearer that putting the two organisations together, we effectively get the best of virtually every single thing, and create this enormous behemoth in the insurance sector,” said Kevin Spencer (pictured right), Markerstudy Group CEO.

The combined business is poised to become a major player in the UK market, distributing a range of insurance products to customers, including home and motor insurance. It will employ some 7,300 people across the UK and transact over £3 billion in annual gross written premium (GWP).

Spencer would become group CEO, while Donaldson will become CEO of retail, the leaders confirmed.

Culling brands while continuing acquisitions

Atlanta currently manages around £1 billion of GWP on behalf of 2.6 million customers. It distributes a range of insurance products through brands such as Swinton, Autonet and Carole Nash.

Asked whether the joined-up business would shed some brands during the merger process, Spencer said that they are reviewing both organisations’ portfolios as they await regulatory approval. He estimated there are between 50 and 60 brands between Markerstudy and Atlanta.

“Both organisations have been very acquisitive over the past 15 years. As we’ve acquired, we’ve looked at whether we keep the brand as we merge the company within the group. We’re going through that process now,” Spencer said. “It would be foolhardy for us not to look at some of these household names and keep them, so the obvious ones would almost certainly stay.”

“This will be an ongoing review,” Donaldson agreed. “Some [brands] don’t get used or don’t facilitate the customer in the way that we want them to, [and it] might mean that we can lose some of them.”

Some brands can access certain risk profiles or customers very well, and those are reasons to keep them, Donaldson said. But he noted that the decision would come down to the data and to the cost impact on the business.

“We both run a lot of brands now, so we can continue to run a lot of brands if we choose to do so,” Donaldson said. “But I think it’ll be dictated more by consumer and cost to make sure we get best outcomes.”

The merger will not slow down either company’s appetite for acquisitions, according to Spencer.

“We probably have three or four deals on the go,” Spencer said. “Both of us are looking at other deals all the time, even as we were going through this process.”

Is an IPO on the horizon?

The leaders also didn’t rule out an initial public offering (IPO) for the combined business in the future.

“At some point, our private equity investors will be looking to capitalise on both sides,” Spencer said. “Everybody will tell you the size of this deal lends itself nicely for an IPO.”

For his part, Donaldson stressed that there was “no desired outcome” on a public sale and that leaders from both sides are still passionate and excited about being on the journey.

“We’re not precious on where it leads over the next two to three years,” said Spencer. “We’re just going to keep building [the business] and making it effective, and it may come to an IPO, it might come to a trade sale, it might come to a buyback.”

What was the deciding factor of Ardonagh-Markerstudy merger?

While the two CEOs acknowledged the size of the merger and its potential impact, Spencer and Donaldson said scale wasn’t the deciding factor.

Having looked at other deals and businesses, Donaldson noted that other opportunities “just didn’t stack up quite as much” as joining forces with Markerstudy.

“This ticks so many boxes,” he told reporters. “It’s not about the scale; the scale is what it is. We wouldn’t do this deal just to be big.

“Doing this deal is all about how we can service our existing customers better, how we can move forward and entice more customers into our world, and how we can make Atlanta and Markerstudy better and more efficient. That’s what it boils down to.”

How do you think the Ardonagh-Markerstudy merger will impact the UK insurance market? Tell us your thoughts in the comments section below.

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