Eddie Longworth, chief executive at E2E Total Loss Management, discusses how value chain suppliers must have a more focal role in M&A considerations
At the time of writing, Direct Line Group (DLG) is destined to fall into the hands of arch rival Aviva – this combined entity should stand second only to Admiral in motor insurance market share.
I also read speculation that Ageas will return to the M&A fray to make a bid for Esure, while Sabre Insurance has announced a target of £80m profit by 2030 – well beyond the planning horizon of most insurers.
This leads me to conclude that opportunities in the motor sector abound for the brave, the focused and those taking a longer-term strategic view of the market.
So, where does this leave the supplier community?
Suppliers left in the cold?
The sad but simple truth is that suppliers rarely, if ever, form part of the consideration when acquisitions are being discussed – if there is a genuinely unique information technology application, then this is the exception that proves the rule.
Maybe this approach should be changed.
Advisors will often dominate M&A proceedings. Financiers, the banking community, lawyers, public relation agents and a slew of others. But no supply chain experts.
In the field of total loss and salvage management, the stakes are high. The monies involved run to millions of pounds per year and perhaps as many as 20% of policyholders who make a claim will experience the trauma of losing their vehicle.
Moreover, every policy does not automatically grant access to a courtesy car for any great length of time as part of the total loss claim. Helplessness built on top of humiliation for the policyholder.
It seems to me that the secret to a successful acquisition lies not in the initial bid – which will always win if the price offered is high enough – but in the subsequent attempt to merge the businesses.
Many reports published by learned commentators suggest that most mergers fail to achieve their goals and one reason must be the strange desire to keep suppliers at arm’s length.
Collaboration beats confrontation
Instead of working together to formulate a strategic plan for success post-acquisition, there is a tendency to laud the opportunities around ‘leveraging’ the deal – meaning to reduce prices – or ‘rationalisation’, referring to reducing staff numbers.
Neither of these goals is objectionable, but they are best achieved when suppliers are treated as an integral part of the new mission and not mere cannon fodder for future savings.
If rationalisation is the desired outcome, then it is likely that an enlightened supplier will have the answers rather than a procurement department focused on process and price.
Whether it be pre-acquisition or post-merger, it is always worth having a conversation built on strategic thinking and the mutual goals of all the players.
As the market continues to change, we welcome opportunities to develop and grow alongside clients that want to look positively towards the future.
