Consolidators stalk the land buying up every regional independent broker they can. But their offers are of no interest to this Hertfordshire businessman. He tells Danny Walkinshaw why he keeps saying no.
No matter where you go, the consolidators are lurking around the corner. Armed with bags of cash, they target independent regional brokers and do their best to persuade them to sell up.
Just ask Peter Smits, managing director of Hertfordshire-based broker Ashbourne Insurance. His family-owned business has rejected more than 100 takeover approaches in the past two years, potentially worth millions of pounds. Like many small brokers in the UK, he is not interested in selling to anyone. Why? “I’m not convinced that I have seen someone that could do a better job than me,” is his answer.
But it’s not the only reason.
Since taking over from his father-in-law more than a year ago, Smits has sought to implement change in the business, which is now owned and managed by him, his wife Sarah Smits, who is finance director, and her brother Matthew Hunt, the sales director. He estimates that he has received about one approach a week on average over the past two years – and points out that the same is happening all over the UK.
“Approaches come in many different forms,” he says. “They can be telephone enquiries from known contacts or brokers, asking to keep them in mind if we ever consider selling. Written enquiries tend to come in two forms: a generic mass mailer sent on an annual basis or a targeted introduction with telephone follow-up. Not every approach is, ‘Here’s a cheque, do you want to sell?’ A lot of them are just sounding you out.”
Ashbourne Insurance, which has group turnover of £5m, is 28 years old and has offices in Cheshunt (£800,000 fee and commission income) and Hoddesdon (£400,000 fee and commission income). Smits says the offers range from 0.75 to 2 times the fee and commission income for each branch, although now the average is about 1.25 times. The price does not interest Smits, however, who at 41 has no plans to sell up.
He has concerns over the business model used by acquisitive companies and does not want his firm to become one of the long line of brokers that have been integrated into a larger organisation.
“It is not in my interest at the moment to look to sell the business,” he says. “I still want to work and there are still things I want to achieve with this business. I find it quite amusing that they are so interested in the independent broker.
“Even now, they are looking at the local market for the value it adds – and yet they want to turn them upside down and turn them into something completely different. Which is completely against what they were trying to do in the first place, I think.”
Smits says between 30 and 40 different companies have sounded out his business.
He admits that the overtures have slowed down in recent months, but recalls a time when it felt like he was being approached every day.
“There are some firms that are very, very persistent and every six months it is a phone call or a letter. There are those that were approaching us three years ago that are approaching us today. But there are certainly not as many people looking to acquire at the moment.”
Some consolidators have entire departments devoted to finding acquisition targets, but Smits is not overly enamoured of the methods they use. “Their approach is usually centered around me, the business owners, or the directors. It’s about ‘what we can do for you’, it’s not about what they can do for your client base.
“It would appear to me that from the type of organisations that approach us, they would be looking to ‘mass produce’ package solutions for our clients, which will not work. Our client base is talking to us because they recognise one size does not fit all and are prepared to pay for the added value and service they receive from a traditional broker.”
Smits is agitated that the consolidators seem more interested in the numbers than in the long-term development of a broker’s client base, which he repeatedly refers to as the lifeblood of an independent broker’s business. He remarks: “Maybe if I was 65 and I was going to walk away, maybe that’s the approach. But it is unfortunate for them that I am not 65.”
He sees a bright future for small brokers despite the recession. “Since the turn of the year we have seen an increase in enquiries to this business. Compared to last year, we are busier. Our shops are busier than they were. This financial crisis has created a bit of a backlash to the major organisations.”
Working for one of the industry’s biggest brokers would be completely different, he says.
“I don’t think I can relate to them. Their working day is diametrically opposed to my working day because of the nature and size of their organisations. It sounds corny but I have to ‘keep it real’. I can walk through the door and there could be an individual member of staff that has a particular issue that could impact on my business. But these guys probably don’t even know half of their employees.”
Smits is close to his 22 staff. In recent weeks, he has outlined to them his vision for his company. His priority is to merge the broker’s two operations. “At the moment we keep them separate operationally, but we do things as a group. Within three to five years we will end up merging the business,” he says.
He is also clear on the type of client he wants to target. “The focus is very much on traditional broking, local markets and personal service. For every 10 people that go online for a quote, there is one saying “help” – and we want that person.”
Smits was one of the first brokers to join the new HSBC network for small brokers, Labyrinth, which was launched at the start of the year. “We are building closer links with a regional network of brokers who all have shared ideas and shared values. Our belief among the network is what we can offer in terms of our local presence.”
He continues: “There is a place for Ashbourne Insurance. We see the next lot of business very much as 75% local.”
Smits, a Tottenham fan, must have heard the terrace chant “We shall not be moved”. It neatly reflects his resistance to a takeover. “Ours is a family business and we live it, we breathe it, we sleep it, all day every day.
“If I’m not out doing something, Sarah’s out doing something. We passed each other in the car park this morning and that is what this business is all about.” Those acquisition-hungry consolidators have a long wait on their hands.