’The market polarising is only making it more difficult for a smaller broker ,’ says chief executive

Brokers “should all welcome” merger and acquisition (M&A) activity in the UK market as some could find themselves “stuck” when it comes to growth.

That was according to Howden’s head of M&A Peter Blanc, who said brokers should embrace M&A instead of saying “there is too much”.

Figures published by FTI Consulting in March 2023 revealed that the UK and Ireland were the most active counties in Europe for M&A in 2022, securing a total of 177 deals.

Blanc explained during Insurance DataLab’s Navigating the UK Broking Landscape webinar last month (24 May 2023) that M&A activity should be welcomed because some “brokers [are] struggling to grow” due to a lack of funds for “talent” and “buying other brokers”.

He said: “So, [brokers] find themselves a bit stuck.

“If [the brokers] have ambitions for their business [and] staff to do more than sometimes a merger or joining forces with a bigger partner, [it] is the right move for their business”.

Market polarising

This came after Nick Houghton, chief executive of JMG Group, told Insurance Times that smaller brokers did not attract the same deal size “as the big Goliaths when they sell” – which in turn presented an opportunity for JMG to acquire them instead.

The group has snapped up several brokers so far in 2023, including JMG Group acquiring Knightsure Insurance Brokers and T I Alexander Insurance Brokers in two sperate transactions in January 2023, while it also purchased HGV and motor trade insurance broker New Era in March.

During the webinar, Houghton highlighted that small and medium-sized enterprise (SME) brokers faced “threats”, such as digitalisation, staffing, succession planning, regulations and higher premiums demanded by insurers.

And he claimed “it is no wonder a lot of brokers are thinking of selling”.

He said: “The market polarising is only making it more difficult for a smaller broker because insurers increasingly would like more premium and this is difficult for a smaller broker, even with a network, to provide that.”

’Enough is enough’

Meanwhile, Blanc argued that smaller businesses with fewer employees were expected to take on responsibilities such as Consumer Duty and fair value without the same level of support as bigger firms. 

He added that was another factor of why acquisitions happen.

“We see a lot of that – brokers thinking ’you know what enough is enough’,” Blanc added.