Briefing: M&A ‘hyperactivity’ could signal future consolidation play

By Editor Katie Scott

M&A activity within the UK insurance broking community has been rife in recent years, leading commentators to pick apart consolidation trends and ramifications with interest.

According to financial consultancy Imas, 2021 was a particularly big year for broking M&A. Its UK insurance distribution M&A annual review - 2021 report, published in February 2022, confirmed that 145 UK distribution M&A transactions were announced in 2021 – these deals equated to a value of around £6bn. Furthermore, 10 individual acquisitions were valued at more than £100m.

The consultancy noted that 2021 was “a record year for M&A by value” and that the year contained “more deals by number than in any other year”.

However, 2022 seemed to pump the brakes on accelerating broker M&A.

Imas told Insurance Times last October that in the first three quarters of 2022, broking M&A deals between £5m and £25m amounted to 23. Based on this information, it predicted that by the end of 2022, this figure will only reach around half of the 61 deals in this price bracket that were recorded in 2021.

Despite M&A movements seemingly slowing down, Phil Bayles – chief commercial officer at Ardonagh Advisory and former Aviva staffer – told me this week that there are still some interesting buying trends to watch for when it comes to monitoring consolidation.

He explained that one tactic used by some broking players is to engage in M&A prior to selling their own business in order to bolster their broker’s value and sale price.

“If you see hyperactivity in the market from a single broker, it’s often an indication that they’re about to sell,” he said.

Boosting value with buys

If we apply this thinking to the broking M&A that has occurred in recent years, there is certainly some indication that a ‘buy to sell’ approach may have formed part of the logic behind certain broker leaders’ decision-making.

Scouring the Insurance Times news archive for examples, it is evident that Aston Lark and its Irish arm made a vast number of acquisitions prior to the news breaking in October 2021 that it was being bought by Howden Group, for instance.

In the first nine months of 2021, Aston Lark bought Deanspoint Insurance Brokers, The Health Insurance Company, AR Brassington and Co, Essex Insurance Brokers, Plester Group, Principal Insurance Ireland DAC, Linkscover, ES Risks, Premier Insurance Consultants (Bolton) Ltd, McMahon Galvin, Veritan Consultants Limited, D O’Loughlin and Co Limited, DNA Insurance Services, North County Brokers, Venture Insurance Brokers, Inet3 Limited, Bruce Stevenson Insurance Brokers, Sennocke International Insurance Services, Build-Zone Survey Services, Right to Health, The Health Insurance Specialists and CRS Yachts.

Granted, Aston Lark’s acquisition trajectory continued at this rapid pace following the new ownership announcement too – it confirmed a number of new deals in 2022 to further add to its portfolio.

In October 2021, Peter Blanc, group chief executive of Aston Lark, told Insurance Times: “We have been growing Aston Lark now for a few years and made some fantastic acquisitions, which we have integrated really well.

“We are really proud that we have got to the stage where we have over 320 employee shareholders in the business, so when it [was] time to look for our new home, I really wanted to find somewhere where our employees know they have got a long-term future.

“In Howden, we have found our forever home.”

Another possible example of a firm that invested in M&A prior to being purchased itself could be Global Risk Partners (GRP), which was bought by US broker Brown and Brown in March 2022.

Between January and March 2022 alone, GRP-owned businesses bought Goldthorpe Insurance Brokers, Bournemouth Insurance Group, PG Insurance and Hamilton Fraser, building on the group’s fast-paced M&A activity in 2021.

Again, GRP has continued to buy companies consistently following its own purchase too – in August 2022, for example, GRP’s group chief executive, Mike Bruce, told Insurance Times: “We’ll definitely be continuing with M&A and are cracking ahead with our model.

“In the coming months and years, you’ll see that we may be looking at other types of business that we haven’t historically been able to make the maths work on in the past.”

On the horizon?

In terms of which broker could be next to embrace consolidation, based on this ‘buy to sell’ methodology, JM Glendinning and its parent company JMG Group could be a likely candidate judging by its recent M&A schedule.

To name a few, JM Glendinning bought The Sphere Group in April 2022, followed by the purchase of GS Group in June.

JMG Group, meanwhile, bought Astute Insurance Solutions in March 2022, Premier Insurance and BJP Insurance Brokers in November 2022, as well as Knightsure Insurance Brokers and T I Alexander Insurance Brokers earlier this month (January 2023).

JM Glendinning’s group managing director, Jake Fox, told me back in February 2022 that the firm was looking “to acquire pretty much everything and anything” because it was aiming to be a consolidator of choice in order to support its five-year target of doubling gross written premium from £50m to £100m.

Complex decision-making

Obviously, there are a myriad of reasons why brokers complete M&A – whether buying or selling – so a quick succession of M&A transactions could simply form part of an internal, overarching strategy to reach particular goals or ambitions.

Let’s also not forget that acquisitions do not happen overnight - often there is a certain degree of lag time between initial conversations, exhanging contracts and the completion of a deal. This can lead to acquisitions completing in a quick-fire cluster, even if the transaction processes themselves were quite spread out.

However, the concept that some firms may decide to shore up their business – and value – through M&A prior to selling is an interesting possible indicator of consolidation action and something I’ll be keeping an eye on moving forward.