Oval looks for mega merger

Oval chief executive Phillip Hodson has opened the door to a transformational deal that could double the size of the business.

He said Oval, which has appointed Rothschild as its adviser, may also push back the planned flotation date from 2012 to 2015, depending on the economy. The development comes as the broker completed its first acquisition in more than a year – buying Gloucester-based firm JL Fisher & Co.

Hodson said: “We appointed Rothschild recently as advisers to look at what we should be doing over the next three to five years as a small national broker of about £100m. We would like to double in size to £200m in the next three to five years, and you have got to see how you would do that. This is a difficult economic time and you have to be sensible.”

He said a float was still one of its options, adding that there is “no point in floating just for the sake of floating”. “What we have got to look at is if the timing of an IPO is right … if we wanted to make a large strategic acquisition prior to that, that would defer the IPO to four or five years down the road.”

Oval has £16m in the bank and a debt facility of up to £100m for acquisitions, and is eyeing up a deal to merge with a business around its own size.

He said: “We will want to look at various companies in that bracket and occasionally there is some sense in having conversations, but let’s see. At the moment, we are buyers not sellers. We won’t do an IPO until we have gone a bit more down the road and we are looking for opportunities.”

Hodson said JL Fisher was a “quality commercial business”, with gross written premium of around £9m, adding that Oval currently had two more bolt-on acquisitions in the pipeline.

But Philip Bland, who says he represents up to six shareholders with £20m in equity, said any extension of the flotation date would show a “lack of ethical standards”. “It's disappointing to me and other minority shareholders who were more or less promised an exit in 2007 to 2008. If they are now talking about 2015, that is breaking an understanding and it shows a lack of ethical standards in my view.”

Click here to read online analysis: Inside the mind of Oval.