A recent survey from the global broking and risk management giant Aon revealed that nearly half of dealmakers expect the volume of mergers and acquisition (M&A) deals globally to increase ‘somewhat or significantly’ over the next year or so. Despite this however, Aon warned that the M&A landscape remains rocky with climate, tax and cyber risks on the horizon.
It’s a warning echoed by Jonathan Clark (pictured), vice president of corporate development at McLarens, who highlighted that volatility is increasing in the insurance M&A market in general.
He cited Deloitte’s 2023 insurance industry outlook which referred to “instability and uncertainty in the global economic and political landscape” impacting transactions this year. Clark added that this is on the heels of an already slower year in 2022 when S&P Global Market Intelligence found that insurance M&A activity slowed significantly.
Having joined McLarens in 2020 to lead its M&A strategy and corporate development, Clark’s team has since completed 10 transactions and built significant internal capabilities focused on M&A execution. He noted that his key responsibilities involve partnering with the McLarens executive team to drive strategic growth in global markets.
“I also lead our teams’ efforts in developing trusted relationships with the executives at the firms we pursue transactions with,” he said. “Finally, after the closing of a transaction, we work collaboratively with the combined entities to ensure the financial and operational integrity of the organisation.
“I come at my role with a unique perspective developed across my 20-year career. I’ve held positions of responsibility in companies being acquired and firms doing the acquisition. I have also held positions within large global companies and have advised on strategic development and business growth through M&A. This provides great insight into the challenges, risks and opportunities faced by both parties, assisting with negotiations, working towards successful outcomes, and planning for working together as partners post-closing.”
Utilising the perspective provided by both his background and the remit of his present role, Clark emphasised that while the market has seen fewer transactions year to date, the level of activity seems to be increasing based on the chatter in the market. That said, however, he expects that current conditions - including inflationary cost pressures and rising interest rates - will continue to influence both the appetite for transactions and well as the pricing, where expectations often lag current market conditions.
“Despite the current volatility, we maintain a strong appetite for M&A,” he said. “We are excited about the opportunities that are actionable in our pipeline. It really comes down to whether a transaction supports the long-term strategy of a business. We are very clear about McLarens’ growth strategy and are actively engaged in finding opportunities and closing deals.”
M&A activity continues to be an effective way to allow insurance businesses to grow and evolve, he said, particularly for sellers as it allows them to meet ever-increasing regulatory, contractual and data security requirements. In terms of claims services specifically, insurers increasingly prefer to collaborate with fewer partners due to these factors, alongside the evaluation and administration accompanying such arrangements.
“M&A can also expedite geographic expansion and help businesses in the sector build out their capability offerings and invest in areas that accelerate their strategic roadmap,” he said. “This includes entering new markets and recruiting high-calibre talent. Such investments can add value for both new and existing clients and help accelerate innovation in core and adjacency service lines.”
Identifying his key recommendations for those pursuing M&A transactions in the current economic and regulatory environment, Clark noted that McLarens’ vision is longer-term in nature.
“We are building it to thrive regardless of the economic cycle that we find ourselves in,” he said. “While we layer in strategies to factor in the current landscape, we are focused on the long-term success of the partnerships we are creating. Here, the most critical factor is the shared vision around strategic goals, company mission alignment, and whether the combined business drives greater benefits for our constituents and the market more broadly.”
Overall, Clark believes that the outlook for M&A in the insurance sector remains positive. It continues to be an effective strategy for businesses to scale quickly, he said, offering opportunities to expand service lines, enter new markets, and acquire top talent.
“However, external factors such as market hardening, inflationary pressure, and interest rate volatility pose challenges,” he warned. “Therefore, while the potential for growth through M&A is significant, success depends on navigating these complex market conditions and securing deals that provide a compelling advantage to help achieve strategic goals.”
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