‘Keen to make acquisitions’ – Gallagher chiefs discuss M&A strategy

Gallagher is ”keen to make acquistions”, with a favourable focus on UK retail, but only if targets meet the broking giant’s cultural fit.

That is the message from UK broking and underwriting chief executive Simon Matson and head of M&A Oli Homer.

Gallagher has made a string of major UK purchases in the last 10 years - including Giles, Oval and Stackhouse Poland - and has a strong balance sheet capable of making acquisitions. 

The UK business has four areas: specialty and London Market, UK retail, the MGA business led by Pen Underwriting and its reinsurance arm. 

Cultural fit 

In an interview with Insurance Times about M&A, Homer said 90% of the reason why Gallagher buys a business is around cultural fit, with all the numbers and due diligence coming after. 

Homer said: ”When you buy an insurance broker, it doesn’t have stock, it doesn’t have assets, it doesn’t have clever algorithms - its got people.

”It’s about relationships. So, we are looking for businesses that want to join us, people who are going to enjoy being here. People that are going to add something to Gallagher.”

Asked about the type of preferred purchases, Matson said Gallagher is favourable to making retail purchases, although it would not rule out making buys in the MGA, London Market and reinsurance arenas.

He said: ”We prefer buying closer to the customer. There’s probably a dark building somewhere with 100 nameplates that have been bought, with no business and no talent left under the roof.

”Primarily, and historically, we have looked at the UK retail space. Not to say that we wouldn’t look at the London Market and speciality space, it is just a bit more diligence is required around that and the understanding of the business, and the ramifications of a Gallagher purchase.

”What we would like at Pen is that it has to be a boutique product. Something that we feel comfortable that we have long-term capital support for and there is rate adequacy.”

UK focus 

The UK has been a ”fertile hunting ground” for Gallagher, Homer said. 

He continued: ”As an organisation, we look everywhere. We have also done things in recent years in Sweden, Switzerland, elsewhere across the wider world and we’re always looking at those.

”Obviously, those take a bit longer and are a bit more difficult.

”At the moment with lockdown, it is even harder still.

”So, it is natural with a big existing footprint in the UK that we will making acquistions there, but it is not the sole focus we have.

”With our presence and our depth of knowledge and footprint across the country, it’s obviously always going to be a fertile hunting ground and there are always lots and lots of things for sale in this country, in despite of the consolidation. It is a very entrepreneurial market and people are always starting up new businesses.”

The Aon/Willis merger

The broking market has undergone major consolidation in the last two years.

Firstly, Marsh snapped up JLT.

Aon outdid its biggest rival by acquiring Willis, with the deal last month given approval.

Discussing the implications for Gallagher, Matson said it presented opportunities.

Matson added: ”Our view, particularly the mega-mergers, is that it is a fantastic opportunity for us.

”People vote with their hearts. If they don’t empathise with the reason for the story for consolidation - let’s be honest, we are fierce competitors with each other - then the gate is wide open for attracting talent.”

In a final message, Homer stressed that Gallagher is open for business.

”We are wide open for business and keen to make acquisitions whichever division they may fall. The message is that we are a permanent home for people.”