Chief commercial officer reveals that the intermediary organisation is aiming to complete 12 acquisitions in 2023, with plenty of transactions closing in Q1 and Q2

The specialist arm of intermediary business The Ardonagh Group – Ardonagh Advisory – is targeting a “regular drumbeat” of M&A deals in 2023, to add “more strings to our bow” and “serve our clients better”, according to the firm’s chief commercial officer Phil Bayles.

Speaking exclusively to Insurance Times, Bayles revealed that Ardonagh Advisory has earmarked around 12 acquisitions that it plans to complete this year, with a large amount of this activity set to conclude in 2023’s first two quarters.

Although Bayles admits that Ardonagh Advisory’s M&A activity has been reasonably quiet in recent years, he says that 2023 marks the start of a blossoming pipeline that is “reasonably sustainable” for future years – especially as Bayles predicts that new UKGI brokers will continue to enter the market and will therefore refill the pool of potential M&A targets.

However, Bayles emphasises that Ardonagh Advisory’s M&A strategy is “about the quality of the deals we can attract, rather than the quantum”.

He explains that the intermediary is not chasing scale through M&A – instead, it seeks to “help talented entrepreneurs realise the real value of their businesses” by sharing its resources and distribution channels to support acquired companies to grow and scale.

“The point is we’re not just trying to become bigger. That’s not really of much merit to us. It’s more about [having] more strings to our bow,” Bayles says.

“We want to be able to serve our clients better and we want to be able to help talented entrepreneurs realise the real value of their businesses by helping them scale up.

“It’s not just about ‘we want to be bigger’. We’re already of a scale that [this is] not the driver. It’s more about what can we bring to those businesses to help accelerate them.”

Three-pronged approach

Digging deeper into Ardonagh Advisory’s M&A strategy, Bayles explains that the firm has three main considerations when exploring acquisition targets.

Firstly, it looks for “businesses that compliment what we already have”.

Bayles explains: “We’ve obviously got a strong regional presence, but if we find a regional broker that’s in a location where we’re not very active at the moment, or its got a scheme that would benefit the rest of the business, those sorts of things make it attractive.”

Secondly, the intermediary seeks specialisms – whether in a broker or MGA. Bayles feels there are greater opportunities around specialist businesses versus generalist firms.

Lastly, Ardonagh Advisory wants to use M&A to “add to our customer proposition”.

Bayles says: “Some of the acquisitions over the last year – like Lorega [in July 2022 and] Stallard Kane [Group in November 2022] – those [firms] add to the propositions that we can offer our clients and make sure that their insurance experience is better than it would be. So, it’s not about doing more of the same – it’s about how would it enhance the business.”

Bayles believes that Ardonagh Advisory has a lot to offer the firms it buys. He acknowledges that often, the leaders of these businesses are brilliant at running their organisation’s operations, however they typically hit a stumbling block when looking to scale up.

This is where he feels Ardonagh Advisory can help.

Bayles explains: “We have a track record of helping businesses fly because of the resources we have and the breadth of what we can do - it’s what can we bring to their businesses that help them achieve their full potential. Everyone wins in that scenario.

“The resources and the capabilities that we can bring to bear will help them accelerate the success of their businesses.

“We’ve got an awful lot of ready-made distribution for them. We’ve got £1.5bn worth of business within Ethos Broking and Towergate Insurance Brokers, we’ve got over £2.5bn in Bravo Networks, we’ve got £300m in healthcare. We’ve got lots of existing customers and distribution.

“The more we can help them grow, the more [the business owners’] benefit from that growth. And, of course, we benefit as well, so there’s a real alignment of objectives.”

He cites achieving scale as a particular problem for MGAs and delegated authority businesses because these firms can be expensive to run, requiring more premium revenue to cover their costs and achieve a sufficient margin.

Geographical diversity

In terms of the location of the intermediary’s M&A activity, Bayles maintains a neutral perspective when considering M&A activity outside of the UK.

Some consolidators, such as PIB Group, have expanded their M&A nets into Europe or further afield amid concerns that UK targets are drying up thanks to the fast pace of acquisitions over the pandemic years.

However, Bayles has “confidence in the UK”.

He says: “[There’s] no rush to put a flag in every country – that’s not the way we work. It’s more about making informed investment decisions where [we] see the right opportunities.

“The next best opportunity may turn up in one country or another, but it’s almost ambivalent where it is – it’s more about the right opportunity and the right fit, the right type of business.”

Despite this attitude, Bayles adds that “a key part” of Ardonagh Advisory’s M&A strategy is to explore opportunities outside the UK because “it makes sense to diversify a little bit”.

“It’s helpful not being massively overexposed to a single geography,” he continues.

This mindset underpinned The Ardonagh Group’s acquisition of Irish commercial broker Arachas in July 2020. It also bought Portuguese Lloyd’s broker MDS in December 2021, Australia’s largest intermediary network Resilium BidCo Pty in February 2021 and Netherlands-based Léons Group in July 2022.

For Bayles, the most important facet of Ardonagh Advisory’s M&A approach comes down to finding “businesses that are a really good fit” in terms of operations, people and culture.

He says: “In terms of strategy, we’ve achieved a decent scale. For some people, [M&A] is about scaling up, getting bigger and you do see people go on runs where it seems like they are trying to buy everything.

“That’s often because they bulk themselves up because they’ve got an event coming up [or] they want to sell themselves.

“We’re not in that situation. For us, it’s about trying to find businesses that are a really good fit.”

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