Both businesses plan to cash in on the ‘real opportunities’ they believe arise from this ‘perfect strategic’ acquisition, including boosting pet insurance distribution
Following MGA Markerstudy’s acquisition of digital distribution business BGL Insurance (BGLI) – formerly part of BGL Group – the newly combined firms hope to “end up with much more than the sum of the parts” thanks to the “natural synergies” and differing skill sets that both businesses bring to the table.
The deal, which was formally agreed at 6pm on New Year’s Eve 2021 and is set to complete in the first half of 2022, is a “further deepening” of the profitable relationship the two companies already enjoy, according to BGLI chief executive Peter Thompson, who has been actively involved in the duo’s prior partnership for around 14 years.
As part of this relationship, Markerstudy features on BGLI’s panel of insurers as a capacity provider. The firms also operate an outsource arrangement, where BGLI services and does the administration for Markerstudy’s direct brands, including Zenith Insurance, Geoffrey Insurance and Co-op.
Thompson told Insurance Times: “We’ve been very deep partners with Markerstudy Group now for many years. We’ve built up a highly trusted partnership.
“[The acquisition is a] further deepening of that partnership and when you look at it strategically, the two businesses are massively complimentary in terms of the skills and capabilities that we each bring to the table and to the party.
“It’s a very good fit from that perspective.”
Gary Humphreys, group underwriting director at Markerstudy, added: “There was already a strong relationship and lots of potential synergies.
“When it was made clear [BGL Group was] putting the business on the market, it just made sense for us to be part of the process because we knew the teams and the business well - it was a really complimentary acquisition for us.”
Under the terms of the transaction, Markerstudy gains BGLI’s insurance distribution arm – which includes affinity partnerships with organisations like Lloyds Bank, Marks and Spencer and the Post Office – as well as BGLI’s own brands, such as motor insurers Budget Insurance and Dial Direct, plus life insurance company Beagle Street.
The ‘complimentary fit’
Describing the deal as a “perfect strategic fit”, Thompson said the “complimentary fit is very obvious” between BGLI and Markerstudy. In part, this is because the MGA operates “in product areas that we don’t currently today, such as pet”, Thompson added.
Humphreys concurred: “There’s a number of natural synergies because our own retail distribution is very much focused in non-standard areas, whereas BGL [Insurance is] a significant player in mainstream personal lines, so [it is] quite complimentary.
“Markerstudy Retail is really strong in affinity business in the pet space; BGL only [does] motor and home on [its] affinity side, so there’s some natural synergies there and opportunities to offer wider products to the affinity base. The attraction for us and the key going forward is making the two arms work closely together.”
Markerstudy additionally plans to tap into BGLI’s digital distribution expertise.
“BGLI is really strong on the digital capability side - we want to bring those learnings across to the rest of the Markerstudy Group,” Humphreys explained.
Thompson agreed that BGLI’s “digital and data capability” was a prime reason “why Markerstudy Group [was] keen to get [its] hands on BGLI”, however the broker’s “brand portfolio” is a further advantage the MGA can now also utilise.
Thompson continued: “We’ve got a fantastic portfolio of partners, so our distribution strength is really clear and obvious. So, you put [these strengths] together and we’re hopeful that we’ll end up with much more than the sum of the parts.”
Humphreys noted that a further plus point of the acquisition is the “exciting talent” that comes with BGLI – he said that around 1,700 staff will be joining Markerstudy as a result of the deal.
He continued: “Like most businesses during the pandemic, we have suffered more attrition than we would usual expect, so this gives us a great opportunity to plug some of those gaps as well.
“[Talent attraction and retention] has been particularly challenging with the work from home scenario.
“We’ve lost more people due to career change during the pandemic then we’ve ever experienced before. It’s nice to get a ready-made pool of talent.”
Planning ahead
In the short-term, BGLI will run as a standalone business, retaining its name, staff and locations. “There’s not going to be a huge upheaval,” Humphreys confirmed, adding that the businesses “will run as independent units”.
However, in the coming weeks and months, both organisations will start to explore the “real opportunities” they can collaboratively layer on top of their existing, individual business strategies.
“It’s a really exciting period for us,” Thompson said.
“There are some areas we would look to explore in more detail - so, for BGLI to distribute pet would be [a] fabulous thing for us to do. Will it feature as one of the priorities? It’s hard to say really and that’s the conversation we need to get through - are there more attractive opportunities that we should be prioritising?”
Grasping opportunities
Initially, selling BGLI wasn’t on BGL Group’s agenda. Thompson explained that the group received a number of “unsolicited approaches” over the summer of 2021, giving shareholders pause for thought.
To fully explore this previously unconsidered option, BGLI engaged investment banking and corporate finance consultancy Fenchurch Advisory Partners to manage “a facilitated process”. Fenchurch subsequently “engaged the market, including Markerstudy” about BGLI being open to M&A offers.
“I don’t think we’d have naturally fallen [into Markerstudy’s] sights at [that] point in time, but with the opportunity arising, [Markerstudy] certainly grasped it with both hands,” Thompson said.
“[The firm was] very committed throughout the whole process. I know [Markerstudy] considered it very seriously and really threw themselves at it.”
PASS NOTES
When did Markerstudy acquire BGL Insurance?
MGA Markerstudy inked its acquisition of BGL Insurance (BGLI) on New Year’s Eve 2021, however the news formally broke to the market following the festive break on 4 January 2022.
Gary Humphreys, group underwriting director at Markerstudy, told Insurance Times: “[The deal] was going on for the best part of last year really, from start to finish.
“The advisors for BGL ran a two-stage process. There was a round one and then narrowing down to round two. Got there in a blink of an eye before it became a 2022 deal.”
Markerstudy expects the deal to gain regulatory approval in the first half of this year.
What does BGLI bring to Markerstudy?
Currently, BGLI has around 1,700 staff based across three offices in Peterborough, Sunderland and Wakefield.
With around three million customers, it provides a range of motor, home and life insurance products in partnership with several UK financial services brands, as well as through its own brands Budget Insurance, Dial Direct and Beagle Street.
Speaking on the deal, Markerstudy group chief executive Kevin Spencer said: “As a leading distributor in the market, taking ownership of BGL Insurance provides us with a unique opportunity to further accelerate and increase our growth potential.
“This is a fantastic springboard into 2022.”
How was the deal funded?
The deal was funded by investment company Pollen Street Capital, which invested in Markerstudy back in January 2021.
Michael England, a partner at Pollen Street, added: “BGL Insurance’s digital and data capabilities are second to none and accelerate many aspects of Markerstudy’s digital agenda.”
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