Buying two regional brokers is a step in the right direction for the consolidator, and it is not the only firm on the M&A trail

After being blighted with bad news so far this year, Towergate has moved onto the front foot by buying two brokers.

The two firms – Bristol-based Centenary Insurance and Penzance-based William Rogers Insurance Brokers – will expand the empire of Towergate Retail’s chief executive Michael Rea.

The purchases are a much-needed boost for Towergate. Acquisitions are vital for Towergate’s strategy. The company needs to grow to continue to service its high debt levels and reduce its debt-to-earnings ratio, which some ratings agencies contend is worryingly high.

Both purchases will boost Towergate’s footprint in the south west of England, and Centenary in particular will improve Towergate’s already strong position in the haulage insurance market.

However, it is unclear how big an impact these acquisitions will have on the group overall, and how much revenue they will bring to the table. Both brokers are small, regional operations and, while important strategically, are unlikely to be transformative acquisitions for a company that generated £154.5m from its retail broking operations alone in the first nine months of 2011, and £280.5m total revenue for that period.

William Rogers, for example, had tangible assets of just £44,369 as at 30 April 2011.

Nonetheless, it shows Towergate is moving in the right direction. And while arguably not game-changing acquisitions, they will help make up for the company’s £3m reduction in retail broking revenue in the first nine months of 2011 compared with the same period in 2010.

Towergate acquired six businesses in 2011, and it is only February, so we can expect to see much more from the consolidator in the remainder of the year.

Towergate is not the only one on the acquisition trail. Aston Scott and The Insurance Partnership have joined forces to buy troubled broker Riverbourne, which went into administration earlier this month. The move will safeguard the jobs of all of Riverbourne’s employees.

In addition, BMS chief executive Carl Beardmore revealed in an interview with Insurance Times that his firm is planning to make acquisitions in the next two to three years as it bulks up to take on the top-tier global brokers.

The broker M&A wave is showing no signs of abating yet.