INDUSTRY INSIGHT: INSURANCE WITH KBS CORPORATE’S RICHARD STOCKS

Whether you’re protecting your assets, property or business, insurance coverage is an absolute necessity.

And not just on a personal level for the everyday consumer. We’re seeing an unprecedented volume of commercial insurance products readily available on a B2B basis.

Success for both general insurance brokers and niche specialists has subsequently been reflected in the M&A market and, as a member of the KBS Corporate research team, I’m seeing just how profitable this trend is for both buyers and sellers.

Research at KBS Corporate

I’ve been a Senior Research Analyst at KBS for over six years and in that time, the importance of identifying buyer trends has not been overstated.

Deals don’t happen without the right buyers — and it is the research team’s job to find them. Our day-to-day operations revolve around maintaining and expanding our professional network.

By being aware of market activity and, on a more personal level, what acquirers are looking for, we’re able to sit down with parties who will see the most value in opportunities.

While interest can vary from sector to sector, I have complete confidence in one particular industry no matter the business for sale — and that’s insurance.

M&A in the Insurance Market

The insurance M&A market is driven by competitive acquirers who are very well-funded, and we know who they are.

At the core of the B2B insurance market is a high level of recurring revenue that protects long-term interests. It’s what is driving groups to consolidate and private equity firms to invest.

The insurance market certainly isn’t going anywhere and, as it is still a sector with considerable fragmentation, there’s a high volume of acquisition opportunities.

In the last two years alone, there were nearly 300 company sales in the UK insurance market, 10% of which had private equity funding. Channing Lucas & Partners completed its KBS-led sale to DR&P Group with backing from private equity house Inflexion.

In another KBS deal, A-Plan joined the Howden Group via Aston Lark, creating one of the UK’s largest brokers managing over $1billion of gross written premium for one million clients.

And it isn’t exclusively on a national basis we’re seeing activity. In May 2023 we completed the sale of InEvexco, a specialist event insurer, to AssuredPartners — the 11^th largest insurance broker in the US with revenues of over $1billion.

The Value of Insurance Brokers

InEvexco stood out to me as a fantastic example of M&A insurance trends. By operating at the forefront of a niche market, they offered a larger group an opportunity to realise new cross-selling opportunities for both existing and recently acquired clients.

However, clients and new products are not the only factors being considered by acquirers. Existing management teams who have utilised their market knowledge to develop their firms can be highly sought-after. The typical deal structure I see includes a period of time in which buyers work with sellers.

Over the course of two to three years, existing shareholders can operate as strategic partners and demonstrate the value of their products first-hand. This was echoed by private equity-backed Jensten Group during their acquisition of Ravenhall Risk Solutions.

As we advised on the sale and held constructive talks with Jensten, it was clear the opportunity to share values and culture with the seller was as important as the financial track record.

The Time to Sell

The reliability of revenue in the industry has created an environment for business owners in which they have multiple deal options.

Consolidators are eager to explore the industry further and I believe it’s the right time for business owners with exit plans to start considering their options.

The sales that have generated the highest multiples, such as InEvexco and Ravenhall, benefitted from deal structures with multiple-year earnouts and a phased exit.

It’s never too soon to start the process when the industry is so active, even if that’s simply a preliminary conversation with KBS Corporate.

If you are an insurance broker looking to sell or would like to hear more about M&A trends, please get in touch for a confidential discussion by calling 0161 258 0118.