Briefing: Consolidating the consolidators in UK broking is on the cards

By Saxon East

Brown and Brown finally got its way. America’s fifth largest broker had been keen to acquire a UK broker for many years.

Back in 2018, there was a rumour that Brown and Brown had wanted to get in on the sale of Jardine Lloyd Thompson (JLT), but was beaten to the line by Marsh.

As of July 2022, however, Brown and Brown now owns one the UK’s major consolidators after purchasing Global Risk Partners (GRP).

The task now for Brown and Brown in the UK is to build on its new buy with more acquisitions.

Consolidating the consolidators

This M&A move by Brown and Brown comes at a time when the core UK commercial broking market is arguably more competitive than ever.

A report published by Imas in February 2022, entitled There may be trouble ahead, revealed an insurance broking market saturated with acquirers – but with fewer brokers to buy.

This has led to talk of a consolidator of consolidators.

The obvious business to be involved in a merger with another consolidator is PIB Group. There was a lot of talk at one point that PIB Group and Aston Lark could merge.

That never happened, but many industry commentators speculate that PIB Group is the most likely broker to be involved in some form of consolidation with another consolidator.

Another question concerning the current M&A landscape surrounds the future for smaller consolidators.

For example, Jensten Group is now a mid-sized consolidator, with around £300m gross written premium (GWP). It has backing from mid-market private equity firm Livingbridge.

Will consolidators such as these find there are buyers out there at the price they want?

Higher interest rates will put pressure on the private equity model, which relies on thin equity and large amounts of cheap debt to fund deals.

If the private equity involvement in UK broking recedes, then the market must turn to trade sales.

The big advantage Marsh, Aon and Brown and Brown have is the strength of the dollar and the weakness of the pound.

The dollar index is at a 20-year high, while the pound continues to lose strength. Sterling could even reach parity with the dollar.

That makes purchases of UK brokers more attractive. The UK speaks the same language, has a world-respected legal system, is an international hub for insurance transactions and culturally, is very much in line with America.

Things may get a little trickier for UK consolidators, but if there’s a good deal to be had, the Americans are never far away.

As Brown and Brown president and chief executive Powell Brown told Insurance Times following the announcement of the GRP deal in March 2022: “We back winners. We like the UK. We like the environment, we like the people, we like the opportunity.”

Amen to that.