‘We haven’t got this cookie cutter way’ when it comes to M&A – NFP

Although some firms within the UK insurance market utilise “a plug and play model” when it comes to their M&A strategy, seeking to ”generate extra commission, revenue and cut costs” through ready-made propositions, Birmingham-headquartered property, casualty and employee benefits broker NFP instead prefers to nurture a culture of accountability and responsibility to give newly bought businesses autonomy, according to its UK and Ireland managing director Matt Pawley.

Supporting the firm’s strategic growth ambitions, NFP bought Wolverhampton-based KGJ Insurance Services Group (KGJ) in October 2021 - this new client base now provides around £33m worth of premium to the business each year.

Starting life as a family-owned commercial broker, with parts of the group’s history dating as far back as 1873, KGJ specialises in broking combined risks for complex and non-standard programmes, such as marine insurance, fleet insurance and wholesale broking.

Speaking exclusively to Insurance Times about the acquisition, NFP Europe managing director John Paul Allcock described KGJ as a “very good broker”. Despite the businesses being market competitors for the past 20 years, the two have “very rarely come up against each other due to respect”, he added.

Building on this sentiment, Allcock noted that KGJ ”really ticked all our boxes” in terms of NFP’s acquisition wishlist, due to its “good management, experienced technical staff that want to take the business forward, great reputation in the market, great client retention, good facilities and trust with insurers”.

Allcock added that the deal will help bolster NFP’s current property and casualty (P&C) offering, as well as help the firm seek opportunities in the wholesale space. 

Pawley, on the other hand, thinks the transaction was “really interesting” because NFP was subsequently able to double its commercial insurance leadership team from three to six, with KGJ’s managing director Richard Cox, executive director Darren Hollinshead and group director Lyndon Hollinshead all continuing in senior leadership roles following the acquisition.

He said: “We look for people who don’t want to walk off into the sunset - that’s fundamental.

“You’ve got three sellers there who have still got loads of ideas, energy and drive - and they wanted to be able to participate in how NFP [grows].

“What made the difference between us and some of the other deals on the table was that the post-acquisition world for them still looked exciting. It looked like they had decision-making power and they could be part of something rather than just being what we would call ‘a folding’ – [when the business being bought is] folded into [a company that has] already made it, build it, designed it, solved all the problems and had a ready-made solution for them [to use].”

Avoiding the ‘cookie cutter way’

Although NFP is still “aggressively looking to buy” following its recent purchase of KGJ, the broker is “not a consolidator in the true sense” because it avoids adopting the conglomerate-esque M&A strategy of a plug and play model, according to Pawley.

This type of model involves newly bought businesses being ‘plugged’ into their new parent firm and adapting their strategies to take advantage of ready-made processes and propositions.

Pawley continued: “One thing we never tell anybody to do when they join us is how to look after their clients. How they look after their clients is up to them - that’s not changing.”

Instead, NFP’s UK operation is drawing on learnings from its international divisions - in particular, acquisitions NFP has made in the US of firms that are “still there five [to] 10 years later”, explained Pawley.

He continued: “We haven’t got this cookie cutter way of doing things.

“A lot of the consolidators rely on the businesses they buy, using certain carriers to monetise the premium. We do it if it works for the client, [but] we don’t want to take the autonomy to place business away from the talent we’ve bought, so we are not going to tell people which insurer to use if they don’t agree with it.

“NFP understands what makes these businesses good and it continues to allow them to operate in that way. What we’ve found is that [a] culture of making people accountable, but giving them responsibility, has flowed.

“They want to act like independent entrepreneurs, even though they’re in a bigger business.”

Thinking of the future

Following its purchase of KGJ, NFP has increased its headcount and not experienced any significant client losses, Pawley added.

This has been a relief for the broker, as Pawley noted that the biggest risks when acquiring a new business are retaining both employees and clients.

FCA approval on deals has also proved to be a challenge.

Pawley continued: “One of the problems that anybody doing M&A has got now, which I think is Covid related as well, is getting FCA approval, which has been an absolute disaster area – that was the biggest pain if I’m being honest and the thing that delayed the deal the most.”

Looking to the future, Allcock and Pawley said that NFP is looking to expand its geographical footprint further, especially in the south east and north of the UK.

The business is also interested in accessing the Lloyd’s market directly, rather than having to use brokers, and wants to buy a direct to consumer online solution for certain classes of insurance.

“We are looking for either businesses that specialise in certain business lines, like construction or professional indemnity, or businesses that have got tools that we don’t currently have,” Pawley said.

“We can do construction business, but you wouldn’t say we’ve got a construction speciality. So, for us, it would be really interesting to think about.

“You’ve still got [a] huge under resource of property, still not enough houses and every year the number of houses we are short of increases by several hundred thousand.

“Commercial properties [are] going to be a bit of a bumpy ride, but if we look at residential property, there’s still huge opportunity there.”