Elliot Lane explains why AMG is such a profitable business
On the morning AMG announced its management buy-out (MBO) in October last year, a call came in to the Insurance Times newsdesk. A bemused reader wanted to point out a mistake on the website. The £62m buy-out figure for the MBO, backed by Hermes Private Capital, "must be a typo", he protested, "it can't be a realistic price".
This flabbergasted response probably summed up the general lack of understanding surrounding the Ashworth Mairs Group operation.
Its founder David Mairs was a flamboyant loss adjuster who enjoyed the trappings of what many would regard as the predilections of an entrepreneurial businessman.
He bought companies in which he saw potential, so AMG shifted into a diverse mix of disciplines including surveying, engineering, temporary housing and cleaning services.
Mairs has now left to pursue other interests but AMG's group managing director Kevin Wood is aware of the perception issues. "Our core activity is loss adjusting but we offer our clients a number of services that can help them either work more efficiently or cut costs.
"We are looking for modest growth, organically rather than through acquisition or merger. If the right acquisition came along of course we would consider it,"said Wood.
"But I can say we don't want to be predominantly recognised as a loss adjuster in three years," he added.
His plan means that AMG should reach £100m within that time frame, double its current £50m turnover.
At present the company employs 70 staff but AMG is planning to start more in-house training and offer an accreditation to its trainee loss adjusters.
He also wants to double the company's market share, which he estimates is presently 4%-5%.
The AMG management's diversity and ambition are the clear attractions to the venture capitalist backers but it also brought ex-Churchill founder Martin Long out of semi-retirement.
Long said: "I was approached back in October 2005 by Hermes as to whether
I wanted to take on the non-executive chairman role.
"At 55, I thought, God willing, I might have another 25 years in me so I didn't want to just sit on a beach.
"AMG offered such a completely different company from anything I had done before. The diversification of services was very attractive," Long said.
He will work a few days a month for the group but added that his business connections would allow the team to explore further opportunities, in particular his relationship with Royal Bank of Scotland, which helped back the AMG buy-out.
Long's surprise appointment came quickly after AMG was retained, with only one other loss adjuster Cunningham Lindsey, on the Groupama panel.
Wood said: "We have always enjoyed a good relationship with Groupama since 2002 when we were appointed to work on its subsidence claims. This has developed so we are now working on commercial and domestic claims. However, we must wait until Groupama has finished restructuring its commercial portfolio before the contract begins."
AMG has also begun developing a relationship with Fortis Insurance in the form of a six-month loss adjusting pilot, providing support on household and subsidence claims.
Wood said: "The philosophy is that we gain additional volume from existing contracts and where we have been offering good service to clients in one area.
"This is leading to us picking up further business in their portfolios."
Ultimately, AMG does not want to "promise the earth, then fail to deliver", he adds.
Expanding the client base to direct writers, which Wood believes are crying out for good claims solutions, is a target market this year and also moving into the burgeoning mid-net worth business for household claims.
"This year insurers, under the FSA's treating customer fairly principles, are going to have to focus on quality, price and service.
"This is not just about compliance protocols but fulfilling customer expectations," said Wood. IT
Kevin Wood explains how AMG achieved its £62m buy-out
The AMG MBO process moved rapidly, taking just four months from start to finish. The initial stage involved a series of presentations to venture capitalists (VCs) and banks, to explain the business model, its potential and to attract interest. Intense competition ensued among the potential VCs. Once we had determined a shortlist, further due diligence followed, including financial, commercial, legal, insurance and management considerations. Because VCs differ in their approach, cultural fit is of paramount importance and it is essential to be mindful of this criteria throughout negotiations. Ultimately, Hermes Private Equity and the Royal Bank of Scotland were selected to support the management team at AMG.
A key challenge related to the MBO route is the need to manage the day-to-day running of the business, in tandem with the buying and due diligence processes. Absolute focus, determination and resilience are required from all members of the management team. There is a particular drain on the financial function, where additional support would be well advised. Post completion, there is the need to carefully manage the transition with clients and staff. For AMG, all have been supportive, in part due to a well planned internal and external communications strategy.