‘There’s always misinformation and bravado around multiples’ says new GRP boss Mike Bruce

In June, Partners& chief executive Phil Barton and chairman Stuart Reid told Insurance Times that the multiples now being paid to acquire small and growing brokers are beginning to damage the broking profession. Mike Bruce, GRP’s new group chief executive, however, disagreed with this outlook.

He told Insurance Times: “There’s always a lot of misinformation and bravado around multiples, but I don’t believe the multiples have changed materially in the last couple of years.

”A good quality business will generate a strong multiple for the vendor and good luck to them if they’ve worked hard to build a quality business that a number of people are interested in – why shouldn’t they enjoy the fruits of their many years of hard work?

“Being part of a bigger business gives career development opportunities to people.

”We have instances where we’ve had people who join us by acquisition as part of a business, now they’re getting into wider group roles, which gives them far greater exposure across a bigger playing field, gives them great personal development [and] exposure to more opportunities.

“Being part of a bigger business, especially at the moment with Covid, it gives a bit of certainty and safety to a smaller business.”

M&A activity

GRP is known for its pacey acquisition trail, which Bruce compares to London buses as “you tend to get them in bursts”.

He told Insurance Times that M&A activity is still very much on the agenda for GRP and that the firm has a “strong pipeline” despite recent Covid-19 complications taking the wind out of the firm’s sails.

“The opportunity is there in terms of the amount of businesses,” Bruce said, confirming that GRP has three or four acquisitions lined up over the next couple of months.

This includes its purchase of broker Premier Choice Healthcare in June; the firm’s first foray into healthcare insurance.

“We are looking at a couple at the moment that are in areas that we haven’t invested in previously,” Bruce admitted. “We are looking to broaden the buy and build platform out a little bit.

“We’ve got a good, strong pipeline and it’s all around looking at good, strong businesses [like] regional, generalist brokers or maybe more niche brokers.”

For Bruce, the Covid-19 pandemic has not hampered the opportunity for M&A, just slowed the process down slightly as firms adjust to the ‘new normal’ of home working before completing due diligence checks and documentation.

He said: “A couple of deals have slowed down a little bit purely because the people we’ve been talking to have had to assimilate home working as well as we have, but it hasn’t cancelled any deals. I think it just paused for a few weeks.

“Just because of Covid-19, a business doesn’t become a bad business overnight.

”Clearly, some sectors are more challenged than others, but if a business has good, strong fundamentals and a clear organic growth play, nothing changes really. It’s just a question of are those businesses still available?”

Coronavirus could, however, “speed up the rate of consolidation” as smaller firms look for greater financial security amid the pandemic-related economic recession.

“Some businesses maybe think it’s safer being part of a bigger beast, part of a bigger business that can help them with various things,” Bruce added.

Although this is a clear advantage of consolidation, Bruce noted that “consolidation in insurance broking, it’s probably the only sector where consolidation is seen as a bad thing”.

He continued: “Many of the insurers have grown by acquisition and mergers, so I find it slightly odd that it just seems to be broking where it’s seen as a negative.

”As long as there’s a positive customer outcome at the end of it, which is always at the forefront for ourselves and the other consolidators in the market, there really shouldn’t be an issue.”

Business developments

Last month, private equity firm Searchlight finally dried the ink on its deal with GRP, officially acquiring a majority stake in the business after gaining regulatory approval.

The deal, which was initially announced back in February, also led to a leadership reshuffle, placing Bruce as the new group chief executive, alongside non-executive chairman David Margrett and non-executive director Peter Cullum.

For Bruce, “the investment was a great endorsement for the model. We’re very, very comfortable with where we’ve ended with Searchlight”.

Bruce added that the acquisition will not fundamentally alter GRP’s business approach or model, however the firm is looking to learn from its new investor – in particular from digital companies that it is aligned with.

Furthermore, Bruce is looking forward to Searchlight’s collaborative involvement with GRP, as the private equity company can present a different perspective to operations, providing a view outside of the insurance sector.

He said: “One of the reasons we ended up with Searchlight is there’s a very close alignment between their vision and our views, of how they like to do business.

”They like buying builds and equally they saw exactly the same opportunity in the UK broking space as we did, so I think at the real high macro level, it will be more of the same.

“Clearly, they bring some fresh ideas and other areas of expertise from other businesses in their portfolio that we absolutely will be looking at.

”They’ve got lots of investment in digital businesses for example and clearly there’s some things there we can learn and utilise across GRP. But the standard, the buy and build, integrating businesses, helping them grow organically, all those tenets still will hold true.”

Sector reputation

On the topic of the Covid-19 pandemic, Bruce added that the discussion around rejected business interruption (BI) claims “hasn’t been reputationally great for the industry”, however “there does appear to be a bit of clarity coming out now in terms of the work that the FCA is doing”.

This is in reference to the regulator’s test case, which is due to be heard in court later this month.

“Things like uncertainty and contradiction are never good for any sector, so getting some level of clarity will be beneficial for the whole industry,” he said.

“Insurance is meant to be around known events. I can understand why some of the wordings are maybe not as clear one way or another as they should be because it’s now being looked at in the rear-view mirror with that wonderful attribute of hindsight.

”Clearly, the regulator’s now taken a good sample and will hopefully come up with some clear guidance.”