There’s room for another consolidator at the top of the market, says private equity house
See analysis: Gresham goes hunting
Gresham, the private equity house, wants to create the market’s next consolidator.
The firm is keen to invest in a broker after selling its 41% stake in Giles Insurance Brokers to Charterhouse in March last year.
Gresham is considering other investment options, including a regional broker that could be built into a national broker – through acquisition or organic growth – or a niche commercial lines broker.
It may also invest in a business in the insurance outsourcing sector.
This might include claims outsourcing, such as companies involved in emergency services, claims validation and repair work.
Simon Hemley, a partner at Gresham, said: “We had success in the Giles transaction and we still see the commercial broker space as being ripe for consolidation. More than 60% of the market is in the hands of the top 10 independent brokers, but the rest is highly fragmented.
“There is scope to create another consolidator as the market has not reached saturation point yet.”
“We are on the look-out for the right deal. If it comes along, we have the funds in place to invest
SIMON HEMLEY, GRESHAM
Hemley claimed the economic downturn could assist a consolidation strategy. “If we find the right platform, then a ‘buy and build’ strategy may be easier.
“The recession could increase the number of potential targets,” he said. “It’s not just about acquisition prices, but owners might think it is the right time to sell.”
Hemley admitted that the recent backlash against consolidators and their commissions – which has been led by insurers such as Norwich Union – had to be considered. Insurers’ increased focus on reducing costs made any investment in an outsourcing provider attractive, he said.
“We are looking for businesses that add genuine value to insurers by reducing their costs.”
Hemley said Gresham had yet to find a suitable target, but the company was ready to move should a suitable opportunity arise.
“We are on the look-out for the right deal.
If it comes along, we have the funds in place to invest.”