Clear Group will acquire bigger brokers after ECI equity deal - CEO Howard Lickens

Clear Group will target the acquisition of larger brokers with its new private equity investment.

Howard Lickens, chief executive of Clear, told Insurance Times the deal with ECI Partners, reportedly worth around £50m, would enable the group to continue increasing the average size of brokers acquired.

While the number of acquisitions each year will remain steady at three or four, Lickens explained private equity funding was required to take advantage of good opportunities in the market.

“If you’ve got a corporate investor behind you then when opportunities do arise we’ll be in a much more solid position to respond to them,” Lickens explained.

“To hit our business plan we will probably need about three or four acquisitions, depending on the size, every year. 

“By having funding effectively in place that’s one of the key problems that I don’t have to solve anymore.

“We’ve survived off mainly bank debt for a long time, and good on them, thank you to them for helping us get where we are, but there comes a time when you need a little bit more backbone and a little more reach.”

Clear today confirmed their 24th acquisition since establishing in 2001 - of John Ansell & Partners, which trades around £5m GWP.

With this new financial backing, currently only awaiting regulatory approval, Lickens revealed he was already looking at a broker handling £20m GWP.

Lickens added: “There are some really good opportunities coming in front of us and if they’re the right deal and they fit we don’t want to then be thinking there’s only so much money we can find down the back of the sofa.”

Brokerbility

Clear will remain a key member of Brokerbility following the deal with ECI.

Lickens expressed his commitment to the group, but did warn Clear’s continued membership will largely rely on a turnaround in the falling membership. The membership has fallen from 36 to 26 in the last few years.

“The intention is to remain in Brokerbility,” he said. “To a degree that will depend on other businesses because if a few others decide to take the money and run then we’ll have to see.

“But we enjoy working with the other members and it’s a positive force in my view.

“We’re clearly of a size where we could get pretty decent deals from most insurers, but I think joining up together and speaking with one voice with insurers and the market generally is a good thing.”

Clear handles around £120m a year in premiums, over a fifth of the total GWP of Brokerbility, and is the largest member of the network.

With the ECI deal, Clear could become even more important to the network.

Brokerbility bosses Ian Stutz and Ashwin Mistry recently told Insurance Times if they found the right investor the network would consider acquiring members to stem the flow of older owners selling up to consolidators.

Clear has acquired fellow Brokerbility members looking to sell in the past, like MPW, enabling the business to remain part of the network. 

And Lickens said he would do it again to keep members in the network, if the deal was right.

Speaking of Brokerbility member acquisitions, he said: “That’s always a possibility and has always been encouraged, but it will suit some members and others less so. 

“The nice part about it is that you already have a period of getting to know people. 

“So instead of having to go through due diligence and understand how people run businesses, with fellow members you’ve been doing half of that due diligence process for years.

“There are some very good businesses within the group and it would be a real shame to lose them.”

But Lickens highlighted that Clear was not part of Brokerbility to target members for acquisition, and would only make an offer as an alternative to a rival consolidator that would remove them from the network.

He said: “We know that the members are solid, we know they’re sound, we like their ethics and the way they do their business, so if we can get ourselves into the frame and it suits our strategy then of course we would be a comfortable home for a number of those businesses.

“There’s a life cycle to these things. We’re all of a certain age and eventually owners are going to look to cash in. 

“If we can help out with that then great, but we are not a part of this club just to prey on the members.”

Investor backing

Along with Lickens, deputy chief executive Gary O’Donnell and chairman Paul Druckman will continue leading the business after the ECI deal goes through.

And Lickens said it was important to him that they found an investor that would allow business to continue as usual.

He added: “When we started looking into this process of finding a financial backer a year or so ago one goes in worrying if you’re sitting down with people who are going to tell you to slash costs and say how you should run the business.

“But all the indications we’ve had from ECI is that they like what we do and they want to help us to do it better. 

“I’ve been really impressed by them and they seem to have the same values that we have. 

“They see the way we’re looking to do acquisitions and the way we are looking after our staff and that’s how they think it should be done.

“There would be no point in them pushing us to radically change things.”

Lickens said that with the added financial backing Clear has the capability to grow faster by acquiring up to ten businesses a year.

But he said there was agreement among the Clear senior management and ECI that the business is best served continuing its gradualist approach to acquisitions to ensure that businesses are successfully integrated and centrally controlled.

Lickens added: “We want to buy a business to make them part of the group, not to park them and come back to them a few years later. 

“There is a limit to the number of deals you can do in a year if you are going to make sure those businesses have some impact on the group.

“We’ve grown every one of the 17 years we’ve been going, but growth itself isn’t the goal. 

“The goal is to have a unified valuable and integrated customer business. Growing for the sake of growing doesn’t do that.”

Acquisition strategy

Clear has five offices across the country, and Lickens said all have potential to grow through smaller bolt-on acquisitions. Lickens highlighted brokers conducting niche and schemes business as being of particular interest.

But Lickens said the group was also interested in opening up new offices through larger acquisitions.

He added: “If we come across locations that could grow to 20-30 staff then that’s what we’re after.

“We don’t want to have offices of 5-10 people dotted around the country because they’re difficult to manage. If we’re going to try and do two, three or four acquisitions in a year, I can’t manage 30-40 locations. It would just fall apart.”

Lickens explained it was all part of a strategy to have a centrally controlled business built on relationships.

“There are not many other consolidators out there who do it the way we try to do it, we’re a bit old school,” he said.

“We want to be dealing with businesses where you can see the whites of the eye of the owner or senior management, so you can build relationships.

“It’s a people game, and we’re trying to make sure we’re looking after people for the long-term.”