2022 has only just begun and already the insurance industry has welcomed news of new deals being struck and acquisitions being completed. With the rate of merger and acquisition (M&A) activity across the sector showing no signs of waning, the question of how to optimise insurance deals is on the minds and agendas of many.
Contending with this question during a recent Insurance Business roundtable, a panel of insurance professionals gathered to reveal how brokers can find the right acquisition partner and to share top tips on how to approach a sale. While exploring how brokers can pick the right partnership, Michelle Taylor, UK head of sales and distribution retail at Zurich Insurance, highlighted that this choice takes time and doing due diligence is essential.
“The ease of doing business part is really key,” she said. “Inevitably, when you’re going through this, something’s going to come out of the woodwork [that] you hadn’t anticipated. And if you have worked with someone that’s easy to do business with, that you’ve built some trust up with, that you’ve built a relationship with, that you know has good standing in the marketplace – that can really help you further down the line.
“I think your relationship and knowing who you’re spending this time with is really key. Because something will happen and you’re going to need to work with those people to leverage that, whatever it might be, whether it’s a customer solution or an insurer solution. So that’s my [advice] - make sure you pick people you like to work with and who are easy to do business with.”
Roddy Simpson, partner at Resolution Partners, noted that a big part of the process of choosing the right partner is getting the right advice. It’s a curious thing, he said, that the market for buying and selling insurance brokers is characterised on the one hand by large, highly experienced well-capitalised buyers and on the other by smaller sellers who often have limited transaction experience and are only going to sell their business once.
Given this imbalance of experience, the need for advice is well-evidenced. Simpson said he finds it extraordinary that so many owners of independent brokers conduct self-advised sales. There is far more to selling an insurance broker than many people realise and buyers’ due diligence processes can be very demanding of small businesses, particularly if they’re not prepared. Working with an experienced advisor who knows the market and can help you explore your realistic transaction options is therefore an action that can pay for itself.
“I think having an advisor is important,” Taylor corroborated. “We work in an intermediated business where customers have choices, so I think brokers should have the same and I think they should get advice on that process… Due diligence is really important. [That means] really understanding who you’re working with, knowing a lot about them, asking questions and asking your insurer partners (if you have that sort of relationship with them). Pick someone easy to do business with and fundamentally somebody honest, and who you trust, because that’s really important in any business relationship that you enter.”
Offering her top tip on how to approach a sale, Sarah Giles, director at Newstead Insurance Brokers, said brokers need to embrace the changes a transaction brings and learn from the journey they undertake. Julien Boughton, CEO of Allen Thomas Insurance Group, added to this and encouraged prospective vendors to meet with the people they are going to be dealing with as the process moves on but also to dig a bit deeper than that.
“Actually get very much into the senior team and do due diligence around the investment within that business as well, if that’s appropriate,” he said. “Answer the simple question, do these people really get us and get what we do? Is there that true cultural fit? And then be prepared for really positive change. It’s easy to say, more difficult to do because it is change but it can be a really positive experience.”
Steven Ross, group head of mergers and acquisitions for Global Risk Partners (GRP), emphasised how critical it is that somebody going through the sales process finds the best partner for their business. That’s one who shares the same values, the same objectives and the same way of doing business when it comes to both clients and employees.
“I think the proof is in the pudding,” he said. “What the vendors should be looking to do is to talk with others who have gone into the organisation which they’re considering. In our business, we’ve [around] 80 plus transactions, so we’ve got 80 plus vendors who will give their own opinion about what’s great about our organisation. I think that’s very important so my tip would be… actually do due diligence around the people who you’re going to be spending your future working life with.”
