The intermediary’s ownership of a broker network creates a potential acquisition pipeline that appeals to the investment bank

By Saxon East

Like King Midas, what investment bank Goldman Sachs touches turns to gold. Goldman Sachs Asset Management has made hundreds of millions in returns by investing in UK brokers.


Saxon East

It snapped up a big stake in Hastings in 2013 and then floated its shares two years later for £1.5bn, before eventually scaling out of all its shares in 2020.

Hastings eventual market capitalisation before being taken off the stock market was £1.65bn, according to figures on the London Stock Exchange. 

In 2019, it invested a reported £320m in Aston Lark before selling it two years later for £1.1bn to Howden.

Now it has taken a majority stake in The Clear Group. If past records are anything to go by, those with shares in the intermediary firm will likely make a handsome return – if they haven’t already.

Goldman ambitions

Goldman Sachs will want to be sure that The Clear Group is doing all it can around margin expansion – possibly looking at administration fees or commissions, as well as cost factors such as IT, centralisation and office space.

Even a one or two percent improvement on the earnings margin can make a big difference to the final sale price.

The real sweet spot for Goldman Sachs will be The Clear Group’s acquisition pipeline.

So many independent brokers have been gobbled up by consolidators over the last 15 years – it begs the question as to how many sizeable brokers are left.

In the first wave making buys, we had Towergate and its rival consolidators – Oval, Giles and Bluefin – which were eventually snapped up by Gallagher.

In the next wave, there was Global Risk Partners (GRP), PIB Group and Aston Lark, which itself agreed to be acquired by Howden Group in October 2021.

Despite the diminished acquisitional landscape around brokers, Goldman Sachs will know that The Clear Group has a big advantage due to its ownership of the Brokerbility network. Any member looking to sell would be a prime acquisition target for The Clear Group.

Outside of the Brokerbility network, there are an estimated 700 brokers in the UK with more than 10 staff, according to an industry source.

MGAs and even overseas acquisitions, in places such as Ireland, should not be ruled out either.

Goldman Sachs will likely be eyeing a doubling in size for The Clear Group’s earnings - probably to the £20m to £30m earnings bracket within the next five years, perhaps faster.

The Clear Group’s last reported earnings – published in August 2021 – were £5.9m, but that was for its accounts up to October 2020 and it would have grown some way since then.

UK broking boost

In terms of relevance for the wider market, the fact that Goldman Sachs is getting involved in another deal shows confidence in broker M&A.

Make no mistake, with rising inflation and interest rates escalating, these are challenging times for brokers.

Thankfully, it appears there is still appetite to acquire their businesses.