Fresh war chest gives Bravo Group acquisition firepower

The Bravo Group, which owns Broker Network, Compass and Ethos Broking is aiming to buy more brokers in the third and fourth quarters this year, backed by £80m in fresh bank funding, it confirmed to Insurance Times.

That will take its overall funding to £200m, both with the private equity funding received to date and the fresh £80m, chief financial officer Simon Drew told Insurance Times on Wednesday.

Broker Network and Compass were brought together under a single umbrella company in a wholesale rebranding of the group earlier this year, with Ethos Broking making up the third pillar of the group.

”The additional funding will take us forward with our acquisition strategy and give us firepower for those”, Drew added.

Results

The Group reported positive 2018 results. Reported revenue was up from £23.1m in 2017 to £53m last year, with reported EBITDA rising from £5.7m to £13.1m. Broker Network reported a 3% year-on-year revenue rise, with EBITDA up by 4%, while Compass Network reported revenue of £4.4m and EBITDA of £1.7m. 

On a proforma basis, i.e, if the company had owned the assets for a full year and had the synergy savings for a full year, Bravo Group would have had revenue of £60.5m and a proforma EBITDA of £15m. 

Bravo Group chief executive Des O’Oconnor told Insurance Times that 2019 is also promising to be a good year, up against budget and so far ahead of 2018. ”Notwithstanding that we’ve had three phenomenal years, there’s still gas in the tank for us strategically to aim at. Let’s take this business to £50m EBITDA and see what life looks like then,” O’Connor added. 

Part of the Compass acquisition last year included buying Compass London Markets, and this has so far proven to be a success story. ”When we acquired Compass last year, we effectively bought two businesses: Compass Network and Compass London Markets. The latter has grown from zero to £10m to £40m [GWP] and we plan to take it to £100m in premium. we want London Compass Markets to be the Lloyd’s wholesaler of choice for both our members and Ethos partners.”

Growth plans

Looking ahead, the Bravo boss outlined the business’ plans. It already has eight UK hubs, and it targeting a total of 12. ”We’ve got another three or four hubs to come, perhaps two to three this year and another next year. It’s a hub and spoke methodology,” O’Connor said. Broker Network brought in 29 new members and Compass had 27 new members. Last year was bullish for new members and 2019 will be the same, he insisted. 

“We rarely lose a member to another network. When we do, it’s often to acquisitions. We don’t acquire every member for sale. We can’t always be number one on price. Also, sometimes members don’t meet our high professional standards, so we have a discussion about mutual separation to make sure we don’t dilute the membership,” O’Connor said. 

The network is set up to provide support for smaller, independent regional brokers which is the mass footprint. Sometimes a member will leave because it has outgrown the network. Members are typically SME. most are £3-5m GWP. ”That’s why we exist as a network,” O’Connor explained.

“Once you get to £30-40m [GWP] they take HR and compliance in-house, management etc. That’s fine. We’ve helped them grow. 

”We have a very stable set of strategic insurance partners. We’ve never been more stable in that regard, said O’Connor. We observe other networks losing insurers quite frequently. But we’re never complacent and we operate to high standards so we can maintain our relevance with the insurers. which is why we don’t lose strategic insurer partners, and the average tenure of a member is 13 years.

M&A pipeline

“Our own M&A pipeline has never been more active. This is the most bullish it has been,” The Bravo Group chief executive stated. “I would expect a big blowout explosion of deals in the second half of 2019. The market has never seen so much capital. there’s a lot of overseas money swilling around. There are new entrants trying to break in to buy a platform. Is that driving prices up? Without a shadow of a doubt it is.

“We see some maverick pricing in the marketplace, but we refuse to follow that model and maintain a disciplined approach to pricing because for us it’s about sustainability. Our investors have trusted us with £110m so far, and the bank is going to trust us with a further £83m. We’ve bought sensibly and testament to that can be seen in the results. We’re under no pressure to acquire. It’s not a boom and bust type model.”

Bravo Group does not see the global brokers as threats to its business though. ”We’re not in the risk management space. We dont compete with the global brokers. We own a confederation of brokers who are important in their communities. Their typical client base is the SME client within fifty miles of their office. It is still a competitive market, and we’re competing with other community brokers but in terms of Marsh, Willis and Aon - no, we don’t compete. They are not who we lose big cases or clients to.