’The big challenge is an SME broker doesn’t really make the needle twitch of a big consolidator,’ says chief executive 

The UK and Ireland merger and acquisition (M&A) market could be polarising as figures suggested activity was starting to peak, according to JMG Group chief executive Nick Houghton.

Figures published by FTI Consulting in March 2023 revealed that while the UK and Ireland were the most active counties in Europe for M&A in 2022, a total of 177 deals were completed in the year, a decline from 197 in 2021.

“Deal activity in the region may have peaked,” the consultancy firm said.

“The decline reflects the increased saturation of the UK and Irish markets, particularly in the availability of broker targets.”

When Houghton was asked if he thought deals were peaking, he explained to Insurance Times that the “right way to think about it is that the market is polarising”.

“So, the big players are getting bigger, while the smaller brokers – the SME brokers – are getting marginalised.

“It is difficult for a small broker to offer advancement and career opportunities for talented people coming into the market because they’re not big enough.

“A lot of smaller brokers don’t have succession planning, they don’t have capital to invest in IT and the digitisation of their businesses.

“So, I feel like the pace of polarisation is increasing.”

‘Big challenge’

Houghton added that these factors contributed to how SME brokers were looked at by acquisitive businesses – but felt that smaller brokers did not attract the same deal size “as the big Goliaths when they sell”.

However, he said this presented an opportunity for JMG to acquire them instead.

The group acquired Knightsure Insurance Brokers and T I Alexander Insurance Brokers in two sperate transactions in January 2023, while it also snapped up HGV and motor trade insurance broker New Era in March.

“The big challenge is an SME broker doesn’t really make the needle twitch of a big consolidator,” Houghton said.

“This is because they are too small and that’s our opportunity.

“So, we’re increasingly buying smaller brokers.”

He continued: “We are just constantly on the lookout for a broker looking to sell and that, fundamentally, we can work with the individual – its only ever about the people.

“We’ve got a healthy pipeline, which has been added to on a very regular basis and this is really pleasing for us.

“When we set off on this journey, we could see that as the market polarises, the volume of smaller deals will go up.

“So, we set our business to make the most of that and that’s now coming through.”