However, the intermediary’s group chief executive reveals he ‘will be keeping a weather eye’ on M&A opportunities around MGAs and Ireland-based businesses too
Intermediary organisation The Clear Group is targeting up to 10 M&A deals in 2023 after a switch in private equity backing from ECI Partners to Goldman Sachs in June 2022 saw the business “recut” its funding and “look at where there are other capabilities and specialisms”, according to Mike Edgeley, group chief executive of The Clear Group.
Speaking exclusively to Insurance Times, Edgeley reveals that as of January 2023, The Clear Group had six M&A deals in “some type of exclusivity” because the company’s “really considered” M&A strategy meant that the firm had “got a really good pipeline for this year already set up”.
“The pipeline is looking very healthy,” he says. “It’s all about selective quality.”
The Clear Group’s M&A approach consists of two main pillars.
Firstly, Edgeley explains that the broker will “stick to our knitting in the UK” to buy “good quality brokers” that focus around its four key lines of business – including property, corporate, professional lines and construction – in order to broaden its existing capabilities.
As part of this, Edgeley also intends to fill out and build The Clear Group’s “very capable London market team” and “wholesale facilities”.
“We like the idea of retaining that medium company size feel about us, but really punching above our weight in those four sectors and being renowned in the industry for being experts in those four sectors,” Edgeley notes.
Alongside growing its current expertise, the second facet of The Clear Group’s M&A strategy is centred around “where there are other capabilities and specialisms” to snap up.
For example, Edgeley is keen to buy an MGA because this “is something that is missing” from The Clear Group’s “stable” at the moment.
The group chief executive is additionally having “some interesting conversations” with Ireland-based businesses and is “keeping a weather eye on whether we start looking at European options at some point in the future” too.
Edgeley says: “We have made it really clear [to] Goldman Sachs that we will grow at the pace that suits the business and what we’re just simply not going to do is stacks of M&A for the sake of M&A.
“It’s got to be something that bolts on to the business and there’s a really good, symbiotic relationship with that business afterwards. Therefore, there’s a set pace that you can go at [in terms of completing M&A].
“There’s probably not going to be more than 10 deals a year. It could be less than that if they are large deals and it could be a little bit more if they are smaller deals.
“It’s got to fit with the business and it’s got to fit with what we want to do, with that rationalisation of how we really look after our clients. [Any M&A] would tend to be [in] specialist segments.”
Despite having had a “fantastic” relationship with ECI Partners for around four years, Edgeley is undoubtedly pleased to now be tied to banking giant Goldman Sachs, which has “fantastic stock” in the insurance market after backing broker Aston Lark from 2019 until it was purchased by Howden Group in 2021.
“[It has] got the experience of working with Aston Lark, so [it does] not need educating,” Edgeley explains.
“[Goldman Sachs knows] this market in absolute detail. [It had] previously worked with Hastings Direct, so [Goldman Sachs also knows] the personal lines market – our chief financial officer was the chief financial officer at Hastings Direct with Goldman Sachs, so that relationship was [already] there.
“What [Goldman Sachs brings] is [it has] a big array of capabilities. [It has] a wide range of consultants who can dip in and out to help with a plan that is in place to make sure it’s delivered and give us some thinking about how to do things differently.”
In terms of initially starting the search for new investment, Edgeley explains that The Clear Group took advantage of market conditions following Howden Group’s purchase of Aston Lark, as well as US broker Brown and Brown buying Global Risk Partners in March 2022.
Edgeley hints that potential investors that missed out on these deals began looking for “another big business that stood out” – this meant “it was an appropriate time” for The Clear Group “to start thinking about going to market”, Edgeley continues, especially as private equity support typically runs in five-year terms, which ECI Partners was fast approaching.
The Clear Group therefore started its search for fresh investment in January and February 2022, with Edgeley confirming that there was “huge appetite” from both trade and private equity buyers in the UK and US.
Upon inking the deal with Goldman Sachs, Edgeley feels that the core of The Clear Group remains the same – however, new backing has “slightly modernised” the business in terms of its platforms, data and staffing approach across the group.
Goldman Sachs has also provided “the funding to deploy for M&A”, although Edgeley is quick to emphasise that this financial support “doesn’t change our stance” in terms of acquisition targets.
“It’s got to be good quality businesses because otherwise you’re just going to end up not getting the benefits of two plus two equals five. You’re going to end up having to inject time and effort into trying to engineer something into the business and that is then not value accretive,” he says.
“[Goldman Sachs is] very attuned to that. We don’t want anything that isn’t a very good quality business joining us anyway.”