IPO ‘one option’ for the consolidator if it can grow

Towergate is currently negotiating acquisitions representing a total of more than £400m in gross written premium, according to chief executive Mark Hodges .

However, the list does not include broking group Cobra, which Towergate is considering acquiring.

“We have got a very healthy pipeline,” Hodges told Insurance Times. “Acquisitions are something this business is very good at – not just doing them but creating long-term sustainable value from them.”

He added that Towergate has a number of different channels to buy brokers, which now include subsidiary consolidator CCV and Broker Network.

He adds, however, that not all of the deals under discussion will come to fruition. He declined to comment on the Cobra deal.

Towergate has completed nine acquisitions so far in 2012. Most recently it bought three regional brokers: Gill Knott Insurance, based in Wellington, Lloyd Manley Associates, based in Chesterfield, and West Yorkshire-based Airevalley Insurance Services.

Hodges’ comments come as Towergate reported flat earnings before interest, tax, depreciation and amortisation in 2011 of £152.4m (2010: £153.6m). The company’s stated aim is to grow EBITDA to fund future growth and pay interest on its debt, but mixed performance in its four core operating units because of tough financial conditions meant the 2011 level was static.

Following Towergate’s refinancing in February last year, there was an indication that the company could float on the stock market in three to five years’ time. However, Hodges said that while an initial public offering (IPO) is “one option” to finance the business in the future, he says there is “no timeframe”.

“All of the short and medium term focus is on how do we grow the business because without that, you don’t have that [IPO] option.”