Briefing: Is private equity taking the right approach when backing broking businesses?

Leading industry experts have indicated that private equity (PE) investment cycles backing UK general insurance (UKGI) brokers is too short term, with the “natural home” for broker ownership actually being “the capital markets” – where “long-term institutional investors” can weigh in to lead “effectively private initial public offerings”.

This vein of conversation cropped up at Insurance Times’ Broker CEO Forum event on 13 November 2025, where around 30 UKGI broker bosses convened at Winchester’s Lainston House to dissect and discuss topical trends and challenges impacting their daily decision-making and leadership.

Interestingly, a number of the delegates and event speakers rang the death knell for the previously popular ‘buy and build’ acquisition model that has been – for the most part – the backbone of broker market growth overall for the past few years.

Generally speaking, this approach has been a firm favourite of PE organisations, many of which have been growing their market share in UK broking over the last decade.

According to July 2025 figures published by advisory firm MarshBerry, of the 49 broker M&A transactions announced in the first six months of 2025, 41% featured PE backing. By comparison, in 2024, 51% of the 152 announced broking M&A deals included a PE investor.

During the Covid-19 pandemic years of 2020 and 2021, when the pace of broking M&A really started to gain momentum, PE companies invested heavily in the UK broker market. In 2020, 71% of the 106 announced M&A deals in the broker sector that year were PE backed, versus 70% of 148 confirmed transactions in 2021, according to MarshBerry.

In my view, this investment uptick in 2020 and 2021 was linked to the resiliency of broking as a business sector during the Covid-19 pandemic – it was one of few sectors that was still flourishing despite numerous lockdowns and government restrictions.

A consultant speaking at the Broker CEO Forum confirmed a similar trend in the US insurance market. He said that over the last 15 years, the number of PE backed brokers in this jurisdiction has increased from two to 45 – he described this as a “significant” change during a “transformative time period”.

He added that today, PE backing of brokers in the US accounted for 75% of this marketplace. “Private equity has dominated the market,” he told attendees.

But is this tide turning to see PE fall out of favour? According to one speaker who featured in a panel entitled ‘What makes a good insurance broker?’, PE has to change its “playbook” when backing broking businesses moving forward.

Evolving the investment ‘playbook’

The speaker explained that traditional five-year PE investment cycles were causing “wrong decisions” as financial deadlines drew nearer, rather than encouraging strategic thought processes and considered actions. He also highlighted a disconnect between the typical buy and build approach versus broking’s natural customer centricity, which naturally has a longer-term slant to it.

He told delegates: “We’re going to have to see a change in the way that private equity thinks about [its] own model, where businesses are run to a five-year time horizon. [This] is a bit like we see in politics, where it doesn’t always fit. You end up with the wrong decisions being made two, three years out.

“The natural home for insurance broking has been the capital markets, where there’s long-term institutional investors that understand the businesses will grow, they will produce dividends.

“We are starting to see that in the biggest brokers, the capital backing those businesses is now effectively private initial public offerings because it’s big, long-term sovereign wealth funds – and the other shareholders recycle themselves over time in minority positions.

“As the sector starts to change and some of the headwinds around rating, around the cost of bolt ons and the cost of debt, I think [PE] has to change its playbook for insurance broking because it doesn’t fit. What really drives value is how you serve the customer.”

A possible ‘mismatch’

The aforementioned consultant agreed to some degree with this perspective when he spoke later in the day during the Broker CEO Forum agenda.

He commented: “Private equity backed brokers have slowly started to decline as they’re [now] trying to integrate and build organic growth strategies. [Previously, these firms] were just stacking revenue and didn’t land an operating model to speak of.”

He added that broker “valuations are not sustainable” either, with “a wide gap between buyer bid and seller ask”.

He continued: “There’s a mismatch between the actual value [of the broker] and what [it is] marked at within the [PE] fund where buyer bids are below valuation marks – capital has become trapped. [This is] really a concerning thing for private equity backed brokers and the influence and impact [these businesses] could have upon the broader market.”

Private equity has been a long-standing supporter of the UK’s broker market and has certainly put its money where its mouth is over the years.

However, the points raised during the Broker CEO Forum provide food for thought, additionally reflecting the slow down in M&A this year as many consolidators have opted to focus on integration rather than further deal volume.

Will brokers continue to be enticed by PE funds and buy and build support in 2026, or will the M&A scene experience a more seismic strategic shift over the next 12 months? I’m all ears.