'We're the alternative to consolidators' – Broker Network's O'Connor

Broker Network only started its acquisition strategy to stop consolidators poaching its members, according to chief commercial officer Des O’Connor.

The policy gives members an alternative exit strategy, if they wish to sell up.

Speaking exclusively to Insurance Times, O’Connor, who joined Broker Network in March 2016 to lead the newly formed partner division, revealed the network was losing 30-40 members a year before the division was established.

Coinciding with a change in shareholder structure and a new access to funds from Highbridge Principle Strategies (HPS) the decision was made to create a national network of acquired partner hubs.

These hubs would then in turn be given the funds to make their own satellite acquisitions – in theory to give members a route out of their businesses.

In practice, the six regional partner acquisitions and nine satellite acquisitions so far completed have included a mixture of members and non-members.

But with the acquisition of a seventh regional partner, currently one of Broker Network’s 150 premier members, expected in July set to push total partner GWP above £200m, O’Connor says the division is on track to achieve the strategy’s aims.

“The strategy was born to benefit and embolden the network,” said O’Connor. “The new management team came together and recognised there was a gap in our strategy.

“We were losing members who wanted to sell to Broker Network, or at least wanted to ask us first.

“This strategy defends the network to make sure our members have that extension of services.”

He added: “It means we now provide services from start-up, all the way through operation, and now our members have that final service where they can speak to us.”

Regional hubs

O’Connor is clear that his priority is to establish a partner hub in every region of the country to meet this demand.

He estimates the final number of partners will be between 10 and 12, and that this could be achieved by the end of 2019. By the end of 2020, he predicts the partners’ GWP will be at £400m.

He says Broker Network’s shareholders are patient, however, and he will not be rushing into any deals. Quality and a shared culture is important to O’Connor when it comes to acquisitions. Getting the right partner is crucial.

“We never make an acquisition for acquisitions sake,” he said. “If the quality is right and it’s a good fit we’ll make a move.

“We’ve walked away from loads of deals. That can just be because we’re not on the same frequency.

“But we’re acutely aware of who’s doing what and looking for a change.

“There are businesses we know we could work really well with, and there are businesses we know would probably prefer to work with someone else. It’s all down to culture and making sure that’s aligned to what we want to achieve.”

This culture, he says, is one that is alive to M&A activity, but is also respectful to a satellite’s own culture, clients, staff and position in the community.

“We know who our preferred partners are in certain regions and they may or may not be Broker Network members, but we don’t decide when they come on the market and that’s the challenge,” he added.

O’Connor and his team have identified 40-50 potential partners, of which 10-20 are shortlisted.

He says each of the partners will then also talk to around 10-15 smaller brokers as potential satellite acquisitions.

Autonomy

Partners are not forced to acquire members who want to sell. O’Connor is keen to stress that the partners retain autonomy in all acquisition decisions.

But he said Broker Network will always work to help facilitate a deal if one can be struck between member and partner.

He added: “It’s up to the regional partner to make that acquisition. We don’t force acquisitions.

“They have to click, so everything we do is about a good cultural fit and a good chemistry. Without that, M&A falls apart.”

And the autonomy of the partners is key to O’Connor.

Other than taking two seats on each partners’ boards, filled by O’Connor and one other Broker Network executive, and the influx of capital for acquisitions and other needs such as marketing, he says everything else remains the same.

The partner has access to Broker Network’s panel of six strategic insurer partners, and support from the network in terms of integration and market intelligence, but O’Connor says all final decisions still sit with the partner’s management team.

As a demonstration of this autonomy, O’Connor reveals Aviva, while not one of the six strategic partners, is the largest insurer within the partner division.

It’s one of the things O’Connor says separates them from the consolidator model.

“We have an anti-consolidator model,” says O’Connor. “A consolidator model is an aggressive model and there’s nothing wrong with it.

“But a model built on synergy, savings and centralisation is not what we do.

“We’re investors in brokers, we support brokers and we’re here to help finance brokers. We want to help them fulfil their business plans.

“You can see from the way we’re deploying our strategy, where we’ve got a federation of really strong brands and management teams and brokers that are all autonomous all in their own right, there is nothing consolidator-esque about that.”

O’Connor is not concerned about the presence of consolidators in the market, and dismisses suggestions that competition is inflating the cost of purchasing brokers.

Member acquisitions

Since purchasing Finch, the first regional hub, for £11m in November 2016, the broker has grown from £20m GWP to £40m, aided by six satellite acquisitions along the south coast.

The most recent was Broker Network member Opus Risk Solutions in May.

O’Connor said as the map gets filled out with partners, he anticipates a growing number of member satellite acquisitions.

He said: “Through 2019-2020 you’re going to see a high frequency of member acquisitions.

“There’s no shortage of capital available for our regional partners to fulfil their plans.

“All have an organic plan and an acquisition plan. We know what they want to achieve and allocate the amount of funds they need for what they’re budgeting for.

“But if they exceed those plans, we’ll supply the funds for that as well.”

He is anticipating ending the year at around £250m GWP, including an eighth partner hub and 4-5 more satellite acquisitions this year.

The member division has been stable at around 600 for several years, but O’Connor is adamant there is no conflict of interest in lifting brokers into the partner division.

O’Connor said: “The network asked for this strategy to be put in place.

“There was a cry out in terms of when the day comes for a change in shareholder, that they preferred us to be there for them for the first conversation. We responded to that need.”