Exclusive: Gallagher UK retail boss Rea opens up on Stackhouse Poland deal

Gallagher is still in the market and looking for new business, but says its focus at the moment is ensuring a seamless integration of Stackhouse Poland.

Earlier this month, Gallagher completed its purchase of specialist broker Stackhouse Poland for £268m ($350m) after receiving regulatory approval.

And now, according to Michael Rea, chief executive of UK Retail at Arthur J Gallagher, the time has come to knuckle down and integrate the business.

He told Insurance Times: “The immediate priority over the next few months is really about the people, about making sure they feel part of the Gallagher family and getting them closer to the senior management group.

“Any transaction creates a certain degree of uncertainty. If you can address those straight away and reassure the team then that is always going to help. So that is a process we have already started and will continue for the next few months.”

Competitive process

Gallagher first expressed an interest in buying the specialist broker over a year ago, and Rea said the process was not an easy one, as there was a lot of competition.

He said: “I expressed an interest to the shareholders of Stackhouse about 12 months ago. From that point we tried to stay close to them.

“Their process didn’t really kick off until October, and they ran a tight and competitive process. We weren’t the only party. They had other trade and private equity options.”

But Gallagher was successful in its bid, fighting off the competition to secure the deal, which was announced at the beginning of the year.

Rea felt the company’s efforts during due dilligence paid divident.

“Stackhouse is very client-focused, it is all about the service. And it is exactly the same at our branches across the UK. So there was a good chemistry there.

“And we knew each other. We worked quite hard to introduce Tim (Johnson, Stackhouse chief executive) to various members of the team and it felt like a good fit. During the first few meetings of due diligence, the wider management team just got on really well, and I don’t think you can really put a value on that. It certainly helped.”

Branding – will it stay or will it go?

Then, he said, the company will look at the brands it has taken on, which will be retained and which will be dissolved under the Gallagher name.

“The next thing to focus on will be to align their business and 23 branches to our 55. So, I guess [it will be] a very logical restructuring to bring that business into our existing branch network.”

On the branding of firms bought by Stackhouse Poland, Rea said those in its branch network will move to the Gallagher brand towards the end of this year. However, he said Gallagher will look at the specialist brands on a ’case-by-case basis.”

He added: “They have a number of specialist brands. We will retain some because we will see value in them.

“The brands under the Stackhouse name will be looked at on a case-by-case basis. It will depend on the sector they operate in as well as their brand’s resonance. But that is something we will not look at in 2019. Any changes will happen in the first quarter of 2020.”

Gallagher emphasised that it is not looking to put any of the newly acquired businesses brought in as part of the sale back on the market.

Continued growth

Rea said Stackhouse Poland and Gallagher have been growing both organically and through acquisitions at an impressive rate, something he wants to see continue.

“Stackhouse Poland is growing organically as well as in the mergers and acquisitions space,” he said. “It is growing at around 4-5% each year, and it is my job to make sure it keeps growing. If it does, we are going to have to invest in more people, not fewer,” he added, saying that no job losses were expected.

“I think the rate is quite good. UK plc is growing at 1%, so at anything higher than that you are beating the economy. We think that is not a bad return especially in these times of economic uncertainty.”