Alongside acquiring businesses in adjacent markets and building on existing specialties, SRG also has plans to become ‘more noticeably international’ in 2023, says group chief executive

Intermediary organisation Specialist Risk Group (SRG) is “quite romantic about M&A” compared to many of its peers because of its “people and culture” focus, according to Warren Downey, the business’ group chief executive.

Speaking exclusively to Insurance Times, Downey reveals that SRG’s M&A strategy is centred around “the motivation of people” rather than “financial engineering” acquisition transactions to create value from multiples.

For Downey – who joined SRG in 2019 – this means that the intermediary falls “into a slightly different category” of broker consolidator.

He explains: “We spend tonnes of time with potential acquisition targets talking about how they work with their people - what’s their longevity and loyalty? What’s people’s attitude to their work? Have [businesses] captured this whole idea that everyone who works for you is a volunteer and we have to figure out a way of triggering that desire [for staff] to do more and do better.

“That means, by definition, we do less deals. That’s okay. The deals we have [completed have] been extremely accretive. Happy owners who feel like [they] made a good choice.

“You can always do more [M&A], but we are trying to select businesses that fit culturally, that have a specialist bent, that are deep and narrow and that we together can do something we couldn’t do apart.

“That’s why lots of the conversations we have are not that traditional process where an advisor invites you and asks you to put a bid in.

“We selectively participate in that kind of process - but we do think it’s quite hard in a people and culture business to get a big pack of information, get 45 minutes to ask questions and then put a number in an envelope. [Brokers are] not that kind of asset. It’s about the motivation of people.”

This approach aligns with SRG’s strapline, Downey adds, of “building the kind of company we’re proud to tell our friends and family about”.

Warren Downey 2

Warren Downey

SRG secured private equity ownership from US firm HGGC back in December 2020 – this backing has fuelled SRG’s M&A activity, however Downey is quick to emphasise that HGGC fully supports and embraces the broker’s cherry picking of acquisition targets.

“We focus on people and culture and we spend money, resource and time on people and culture in a way that if we didn’t have a private equity backer that understood that, it would be a real clash,” he says.

“We are not put off by multiples. We’re just attracted to very high quality businesses and doing the right thing for those [businesses]. We’re not scared by the price. We’re attracted to the asset.”

Tapping into adjacent markets

Following 2022’s round of acquisitions – which included purchasing motor trade broker Hamilton Leigh in September and acquiring the London-based special risks team from corporate broker Bridge Insurance in January – SRG now boasts a headcount of over 500 staff.

However, Downey has plans to further broaden SRG’s scale of specialty services by expanding into adjacent niches that compliment the broker’s existing books of business, which concentrate on “deep”, “narrow” and “difficult” classes.

This will be achieved through a combination of “gathering of talent from a few different places to build a team”, hiring specific individuals and making whole business acquisitions.

“Adjacent segments are always interesting,” Downey explains, “because you’re not stretching yourself very far”.

One example of where Downey would like SRG to put its feelers out is around transaction liability insurance.

Currently, the business’ MGA - MX Underwriting – provides “transactional liability support [for] real estate transactions”, covering specific challenges such as abortive planning costs and right to light debates.

These topics are “very specialist, but very focused around the change of ownership of assets in the real estate world”, Downey says - this is where he spies an opportunity.

He continues: “It’s not an awfully big step to the side to do more general transaction liabilities for other assets that change hands - and we do a little bit of that.

“But, having been involved in that segment in the UK and in Scandinavia and in Asia, we do have a passion for that and we’re not in it. We’re only touching the sides of it at the moment. We do a bit, but not as much as we could.”

Downey admits, however, that SRG is “slightly less attracted to the very carbon intensive, most traditional parts of the market”.

He says: “We are [more interested in] complex and emerging liabilities and surprisingly deep and narrow specialisms.

“I don’t think we’re about to start an energy team, or a power team. But, within our MGA, we do underwrite the risk of challenges to planning permission for wind farms in Europe.

“For us, it’s about that niche and where we operate should be a place where people need our expertise, rather than you can buy it from anywhere - that’s a filter for us.”

Going international

As well as leaning into new adjacent markets and buying “more of what we’ve got” to build on SRG’s current specialties, Downey is also keen for SRG to make moves further afield by becoming “more noticeably international” in 2023.

To start, Downey wants to internationalise SRG’s insolvency business.

He explains: “We’re about to enter very, very difficult times - we need to provide a solid service in that area and we may expand that business. We might do that through a combination of hiring and acquisitions.

“It’s also true that it’s not just the UK that’s going to go through difficult times and so we are looking closely at internationalising that business and taking that real, deep knowledge about what is needed in times of crisis and insolvency and saying that those dynamics are pretty similar in lots of different places.”

Although noting that many “consolidators are looking overseas” for M&A targets, Downey adds that this is not SRG’s intention or route to becoming a more international business.

He says: “When we stood up in November 2019 and said ‘when we’re done, this is what [SRG] will look like’, it included opportunities for people to work overseas.

“[SRG is] a business that follows specialism where it takes you - not flags in maps, but international specialism - because that’s the most exciting thing to be part of.

“We [have] had a phase of expanding our retail business, we had a phase of building out our MGA. I think we will have a phase of keeping doing that whilst [also] turning our attention to the international opportunity as well.”