Tim Johnson, chief executive of Cullum Capital Ventures, tells Andrew Holt of the company’s clear business approach and its plans to reach £350m within three years
Many in the market have observed with interest the development and growth of Cullum Capital Ventures (CCV), the Peter Cullum backed venture capitalist group launched to buy a certain type of broker.
The more critical say it was set up to buy up brokers Towergate did not want, or, according to another version, to find a role for Tim Johnson the former chief executive of Towergate, who was left without a position when Folgate and Towergate merged – with Andy Homer taking the chief executive desk.
Tim Johnson, chief executive of CCV, laughs at this. “I would be very flattered indeed to think that Peter Cullum thinks so highly of me that he created a new company just to keep me in work.”
Clear business approach
And rather than picking up Tower-gate cast-offs, the creation of CCV has always had a clear business rationale. “I sat down with Peter and we identified a segment of the market that could use a different type of group and approach than Towergate.”
This approach is threefold. Firstly to broadly buy up brokers in the £3m-10m region of GWP, secondly buy on a bespoke basis which sometimes equates to buying a minority stake with a ‘put and call option’ of buying up the rest of the business three to five years later, and thirdly to ensure that the business keeps its own autonomy and name.
“We are dealing with businesses that are often family-run and there is a lot of emotional involvement that has to be dealt with. When Towergate takes over a business it is often through advisors, and there is not usually the same level of emotional connection.”
Launched in April 2006, the structure of CCV was made up of a £92m war chest created from an £81m investment from Bank of Scotland Corporate, HBOS’s corporate finance arm, and £11m made up from the major shareholder Cullum, along with Homer, Johnson and others.
Johnson has seen good steady progress in his acquisitions since launch. There have been a total of 12 completed, which has beaten the launch aim of achieving £50m GWP by this June with these totaling £65m. The next yardstick is also set to be beaten.
The aim was to top £100m by the end of this year, but with six purchases in the pipeline this means a further £35m will be added to CCV’s business by the end of July.
This means this year’s target will have been reached five months early and also puts Johnson and CCV in a good position to achieve the expected £350m within three years.
The most recent purchase was a minority stake in the insurance business of Norwich broker Smith & Pinching.
The business, with a GWP of £13m, has a sizeable household scheme portfolio, as well as a book of commercial and personal lines business, and represents about one third of the Smith & Pinching Groups business portfolio.
As a result of this acquisition activity, the CCV team has now expanded to number 12 with two regional managers undertaking the responsibility of dealing with the geographic spread of the businesses bought.
Johnson is clearly putting his own industry experience to good use. He began his career at Royal Insurance as a graduate trainee in Liverpool not far from his birthplace in Leigh. Then, through a fortuitous dinner in 1994, he was offered a role at Aon within the corporate and sports department and had to move south. He was soon chief executive of Aon’s affinity and SME business.
But after nine years he wanted to move on. He sought advice from a good source: Neil Utley, then group chief executive of Cox Insurance. “My mentor within the industry is Neil Utley. I turned to him for advice and he suggested I take on a new challenge, look around, and see what was on offer,” says Johnson
Unusually Norwich Union (NU) proved to be a bit of a matchmaker between Johnson and his new boss Peter Cullum. It was thanks to an NU organised skiing trip that brought them together.
After a few days on the piste, Cullum offered Johnson a role at Towergate, that of chief executive. But with the Towergate Folgate merger in 2005, Johnson ventured into planning the launch of CCV.
Still keen to differentiate CCV from Towergate, Johnson elaborates on other ways it works. “We can help with MBOs as well as MBIs, giving management the opportunity to have the capital they need to take the business forward, in return we get a shareholding in the company,” he says. Amounting to what is an orthodox venture capitalist company.
With the broker goodwill insolvency ruling likely to become a major issue from the beginning of next year, Johnson also doesn’t miss a trick. “We can help brokers with their balance sheets in any way we can.”