The consolidator CEO talks about returning to the acquisition trail and the importance of culture when integrating a new business
Matt Scott: Why was now the right time for Gallagher to make a return to acquisitions?
Michael Rea: Whether you are in North America or the UK, bolt-on acquisitions are very much a part of how we build the business. The last couple years we have been focused on integrating two very big businesses we bought three or four years ago and that integration activity largely came to an end during the middle of last year.
So we now have a platform that is stable and all of our business is on a single IT platform, which means the time is now right to bring more businesses back in.
MS: And what do you look for when assessing a potential acquisition target?
MR: Culture is first and last. Clearly you have to make the financials work for you, but that is almost housekeeping. Regional brokers are not difficult to value, so the valuation is fairly simple, and of course you have to do due diligence, but ultimately you have to meet the management and like them, because they are people who are coming into my leadership team and I have to think if I can work with them.
You can have a great financial story, but if the culture doesn’t fit you are going to end up in a car crash.
Doing small bolt-on acquisitions is exactly what we want, because whatever we buy there will be one of our offices 15 miles away that can buddy up [and help with easing that integration process].
There is no particular geographic strategy to our acquisitions; it is about doing the right deal at the right time. We would rather get deals done right than done quick. The guys in our branch network know the good brokers and who we have a relationship with] and that helps with getting the deal done right].
If you can talk to a business using someone locally it is more like a warm prospect than a cold call, and when you buy businesses they always have a couple businesses that they would’ve liked to have bought, but would’ve involved taking on debt. Once you are in the Gallagher family that deal can now happen.
MS: Once the deal is done, how do you go about ensuring a smooth integration process?
MR: After all the excitement of the acquisition, there’s still a day job, which is looking after clients, so making sure people get back to looking after clients is the single most important thing [of the integration process].
When you buy a business, you are really buying the staff and the clients. You need to make sure people feel good about the organisation, that you communicate well with the clients that although the business has been acquired by Gallagher, it is only good news for them - they will continue to see the same account execs but we can bring a broader product set, greater leverage with insurers and the breadth of what we can offer clients is a lot more.
MS: And can we expect to see more deals over the coming months?
MR: We have a pipeline of other deals and have signed heads of terms with a couple of those businesses and expect to announce a few deals over the second half of 2018, and that’s a strategy that will continue through 2019 and beyond.
There are 3,500 insurance brokers out there, so there are plenty more fish in the sea.