Consolidator to buy Broker Network for £95m
Legal settlement reached with former staff who poached 65 clients
Towergate stamped its authority on the market this week, with the announcement that it is poised to buy Broker Network for £95m, and the revelation that it had taken legal action against two former employees who poached 65 of its clients.
In a move that would give it access to a huge distribution channel, the consolidator is set to agree the purchase of AIM-listed Broker Network (BNL) and the creation of a network division, to be headed by Broker Network’s chief executive, Grant Ellis.
The move follows Towergate’s purchase of Open International, including the Countrywide Network, in September and fulfils the consolidator’s aim to establish a network offering to complement its distribution channels of owned brokers and managing general agents.
Broker Network controls more than £450m in premium.
Towergate chief executive Andy Homer said the purchase, its bigger broker buy yet, would allow Broker Network members to get better deals from insurers. “Hopefully [this] gives us the opportunity to improve [BNL] margins by supporting Towergate products,” he added.
Homer would not rule out the possibility of purchasing further networks, but said the immediate strategy was to focus on growing the Broker Network and Countrywide simultaneously.
He said: “We understand it will bring some of our businesses into competition with each other. But there’s nothing wrong with that.”
Towergate’s offer was announced on Tuesday morning. Ellis revealed that 62% of shareholders had already accepted it. The deal is expected to be completed in January.
Ellis said that Towergate had improved on its previous offer for the business. He said: “They came back and addressed everything we didn’t like.”
“We understand it will bring some of our businesses into competition with each other. But thereâ€™s nothing wrong with that
However the purchase could provide rival networks with an opportunity to poach Broker Network members which do not want to become part of Towergate.
The managing director of one member said: “If things were not to continue as we envisaged at the time we joined, I would have to seriously consider my position.”
Meanwhile, Towergate has reached an out-of-court settlement with former staff members Jeremy Clifford and Adrian Littler, who have agreed to pay the company a six-figure sum in addition to its legal costs.
The two left the company at the beginning of the year to found their own broker, CLA Risk Solutions.
Homer said: “In early 2007, Clifford and Littler poached some 65 clients from Towergate's own book of business before Towergate obtained an injunction preventing further solicitation.”
During the case, Homer said evidence came to light which showed that Clifford and Littler had breached their employment contracts.
In addition to the charges, Clifford and Littler must also honour their restrictive covenants until March next year.
Littler confirmed that legal action had been taken, and an agreement between the two parties had been reached.
He said both sides were “extremely happy” with the outcome but would not com-ment on the terms of the settlement.