Welsh broker's acquisition strategy will target brokers with commercial clients

Welsh broker Protectagroup is in early discussions with a number of brokers as it looks to expand its operations through an aggressive acquisition strategy.

The company, which specialises in personal lines business, is looking to acquire more than one broker with a commercial client base within the next two years.

Group chief executive Paul Ragan told Insurance Times: "We are getting ready to acquire and have a target list of about 25 companies with a couple of those being London-based businesses.

"We would like to acquire something of a sizeable nature in 2007 with a turnover of around £7m-£8m and then acquiring another business of a sizeable nature in 2008 with a turnover of £11m-£12m."

Ragan said the company's acquisition strategy was probably more diverse than most, as it was looking at acquisitions as well as at reciprocal opportunities.

"[These opportunities] for example, could be us talking to a financial services company about providing its half a million customers with car insurance," he added. "Through that kind of arrangement we would still achieve top line growth, but without spending £20m to do it. Ideally we would want a mixture of the two."

The chief executive confirmed that through both acquisition and organic growth, the company intended to increase its turnover by around £10m in 2007.

By 2011, it hoped to increase that figure through a refinancing or listing arrangement to around £40m with an overall group profit of £10m.

"The key thing is to find the right acquisition," Ragan said, but he warned that it would be a challenging market for smaller brokers.

"Some of the numbers we are hearing and seeing, in terms of people selling companies, are not one to two times brokerage, but two to three times," he added.

Consequently, Ragan said it may have to pay an additional premium of around £3m to win the confidence of the seller, as other potential bidders such as Towergate, had greater credibility in the acquisition market.

Protectagroup rebranded in 2005 following an MBO by former Motaquote Insurance executives in 2004.

It is recognised as Wales' largest independent broker employing more than 170 staff and administering around 100,000 policies for more than 60,000 customers.