Filling the UK’s ‘gap’ of ‘traditional £20m, £30m ebitda brokers’ following post-pandemic M&A boom is a ‘positive system’, according to Broker CEO Forum speakers

Rampant mergers and acquisitions (M&A) in the UK’s commercial broking mid-market has created a “scarcity” of acquisition targets and “a gap of traditional £20m, £30m earnings before interest, taxes, depreciation and amortisation (ebitda) brokers”.

That was according expert industry panellists attending Insurance Times’ Broker CEO Forum retreat on 16 and 17 November 2023, who also said that such a situation was “where the opportunity is” thanks to a “positive system” of regeneration.

According to the European Insurance M&A Barometer, published by FTI Consulting on 5 October 2023, broker consolidation deals in the UK and Ireland formed the bulk of European M&A in the first half of 2023.

Across Europe, the insurance broking sector accounted for 86% of M&A activity in H1 2023, equating to 229 transactions, compared to 186 M&A deals in this market in H1 2022, the consultancy added.

Speakers attending the Broker CEO Forum at Winchester’s Lainston House confirmed this landscape, noting that there was a “scarcity of [M&A targets] in the UK” after a recent flurry of M&A in the broking mid-market sector.

Examples of this movement include The Clear Group securing new private equity backing from financial services business Goldman Sachs in June 2022, Global Risk Partners selling to American broker Brown and Brown in July 2022 and Howden Group purchasing Aston Lark in October 2021.

Opportunity knocks

Addressing Broker CEO Forum delegates, expert speakers explained that this environment was “where the opportunity is” because “businesses keep on regenerating” to help fill the void left by mid-market consolidation.

The panellists listed a number of different strategies that broker entrepreneurs could adopt in order to plug mid-market gaps and seize the subsequent available opportunities.

This includes buying and building lower cost broking businesses around the £1m and £2m value mark, individuals leaving bigger broking firms to set up their own companies or “underwriters looking for MGA type startups and funding”.

One speaker said: “I see quite a positive system that loves to regenerate.

“That’s the beauty of the market – that it regenerates full of great entrepreneurs who know how to build and make money. That will continue. Businesses keep on regenerating.”