It is surely too soon to sound the death knell for broking M&A just yet, based on recent activity

By Matt Scott

Consolidation is dead. Long live consolidation.

There are many in the market who say that the era of mid-market broker consolidation is over, or at least ending.

Indeed, figures from FTI Consulting published last month (22.03.2023) have already revealed that the number of M&A deals across the UK & Ireland decreased in 2022 after hitting almost 200 the previous year.

Matt Scott

Matt Scott

But despite this, the UK and Ireland (UK&I) continues to be the hottest market across Europe with 177 deals completing during 2022.

So is mid-market consolidation coming to an end? I’m not so sure.

Consolidation poster child Ardonagh sent the rumour mill into overdrive recently after its Q3 2022 results revealed a restructure that led to whispers of a possible divestment looming on the horizon.

Rumours persist that the group could be looking to sell one of its business arms and while, at this point, these rumours remain nothing more than that, a possible divestment of some of the group’s assets is certainly a tantalising prospect for anyone in the industry.

This doesn’t, however, mean that Ardonagh itself is looking to leave the acquisition trail, with Ardonagh Advisory’s Phil Bayles telling Insurance Times just last month that the specialist arm of the Ardonagh Group was looking to complete around a dozen deals over the course of this year.

If Ardonagh is looking to divest in the near future, then we could soon see a seismic reshaping of the industry, leading to a very different look to the top end of the market that could lead to a very different approach to M&A.

On solid footing

While Ardonagh’s future may be surrounded with rumour and supposition, there are a number of brokers who are embracing the consolidation label and see it as a solid route to future growth.

GRP has been one of the most active of the consolidators over the first three months of 2023 and now that they are part of Brown & Brown – the sixth largest broking group in the world – they certainly have the backing to continue down the acquisitive route.

The group’s chief executive, Mike Bruce, has even made as much clear, telling Insurance Times in August 2022 that the business will “definitely be continuing with M&A”.

Howden, of course, continues to supplement its impressive organic growth with acquisitions. And it is a Howden-owned business that could hold the clearest sign yet that consolidation in UKGI is far from over.

Aston Lark was a famously acquisitive business prior to – and after – being snapped up by Howden. The business’ then chief executive Peter Blanc – now executive chairman of Howden in the UK & Ireland – is certainly no stranger to M&A.

One of the benefits of such acquisitions is that they can quickly add value to a business and this buy to sell approach to broking consolidation is certainly a tried and tested route to growth – and ultimately exit – for many a broking boss.

One broker that could be about to embark on a similar route is JM Glendinning, with group managing director Jake Fox openly admitting that the business was looking to “acquire pretty much everything and anything”.

And there are others adopting a similar approach too.

What the ultimate end game is for businesses such as JM Glendinning, of course, remains to be seen – but it certainly seems to indicate that broker consolidation is far from over.

And then there is private equity.

The perennial backers of many a broking business, private equity continues to have a love affair with brokers, enamoured with the sector’s cash generative nature and built-in resilience to economic downturns and market shocks.

They certainly continue to see the value in the market and where there is private equity cash, there will undoubtedly be acquisitions following in its wake.

So while multiples may not be what they used to be by the time we reach the end of 2023 – and deal volumes might not hit the heady heights of 2021 – it is surely too soon to sound the death knell for broking M&A just yet.