For anyone who has been through the experience that is guiding an M&A transaction to completion, the phrase ‘it’s not the journey, it’s the destination’ will likely ring true. But that’s not to say that there’s not a lot of value and insight to be gleaned from the journey itself, noted Tim Smyth (pictured) discussing the recent acquisition of UK General Insurance (UKG) and Precision Partnership Limited (PPL).
As CEO of UKG and RCHL Group (the former holding company of PPL), he said, the alignment between the two businesses in terms of their skill sets, distribution and technologies was always evident. So, when the opportunity to bring the two businesses together under new investment from Rcapital Partners LLP and Montague Investment Partners materialised, it was too good to miss.
Exploring the optics of the deal, which is pending regulatory approval, Smyth said that what he’s most excited about is the mutual benefit that bringing together the great talent on both sides of the business will yield.
“There’s already customer overlap,” he said. “And I think by formally bringing the businesses together, it makes it much easier for us to trade with some of our distributors in a wider set of areas. We can make it easier to onboard new opportunities, understand their needs a bit further and lean more in to them with a broader subset of the team. That’s really what drove this.”
For both UKG and PPL, underwriting profitability is the number one consideration, Smyth said, and given the evolution of the market, historically that has sometimes been challenging. But with the market where it is now in terms of fully recognising what MGAs add to the insurance process, the value of businesses with that focus is coming into its own.
“Unless you’re bringing value into that process… you’re not really bringing anything to the table,” he said. “And we can layer on top of that our operational efficiencies, our insights around data, and we can build and design products for very niche customer sets that really play to [where the market’s leaning as well]. All of that really resonated with RCapital and they felt that the businesses would benefit from the investment they could bring to the table. And they were very supportive about bringing the two companies together.”
Looking to the future of the combined business, Smyth believes that this acquisition and injection of capital will offer a great variety of new opportunities taking the form of both organic and inorganic growth. The combined group represents a new offering to the market – a niche and specialist schemes player with a “relentless focus on profitable, measured growth”.
The group is quite product agnostic, he said, and its expansion plans are centred on finding the right proposition and the right alignment rather than on any specific sector or product. The key questions when considering a new opportunity are – how can the business add to the distribution chain? What can it bring in terms of underwriting profitability? How can it manage the process?
“We see a number of areas for expansion,” he said. “Bringing in teams with product expertise in areas that we’re not already involved with is very high on our list and we’re already in talks with a number of those teams. I think one of the big draws for them is what we can bring to them, maybe that’s areas they can’t currently cover but by working collaboratively with other people they can.
“And I can genuinely say, we will be able to bring to them things that they don’t have any access to at the moment which will then make their proposition with their client much stronger and vice versa - we’ll benefit from the expertise they bring to the table.”
The combined business will also be exploring complementary acquisitions, Smyth said, and is looking for businesses that are naturally aligned to what the team is doing and the way they’re doing it, while supplementary in terms of their product expertise. Whether growth is through bringing on new teams, through buying businesses or through organic expansion into different product lines, the basic principles are the same – underwriting profitability, adding value through technology and data insights, and offering something new to the market via a collaborative approach.
“We’re growing very quickly at the moment,” he said. “And I’ve been very pleasantly surprised at the response we got to our [acquisition] announcement last week. I thought I had a full pipeline before! Now after the announcement, I’ve had so many more opportunities come my way, I’ve had calls from people I’ve not spoken to in years saying they’re excited about what’s going on with our business and asking how we might be able to support them.
“[…] We’ve got so much opportunity now that we just need to make sure we can keep that in check. And we’re very proud of our speed of delivery. The thing that sets us apart from a lot of insurers is that we’re a team that works very collaboratively, so we’re always working together on the projects we currently have on our plate. And we look to deal with those in a short timeframe and move them quickly into a business-as-usual environment before moving on to the next thing.”
A scattergun approach of trying to handle everything at once all too often results in businesses failing at everything, he said, and the ability to gel a team together under a collaborative banner is really what differentiates a successful MGA. Real value doesn’t come down to being cheaper, but rather delivering an offering in the time that a broker or a distributor requires, and that’s a proposition the teams at both UKG and PPL can stand behind.
“It was great to see our news shared across the market and to see how much goodwill there is out there for our businesses and the people that work within them,” he said. “And the teams I’m working with are incredibly talented, hardworking and loyal people who have really bought into this vision and this way of working. A lot of bigger organisations understandably can’t get this level of collaboration going because of their size or structure and that to me is a barrier to delivering a great end product.
“And getting this feedback, with people emailing or ringing or reaching out on LinkedIn has been really humbling, but it is about our people. It’s not about me. It’s about the people that work within the business and the history that the business has. And people want us to succeed which has been really been lovely to see.”