“If it ain’t broker don’t fix it”: Overcoming the status quo of broker M&As

June 12, 2019

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by Jeney Rajan Value Creation in Deals Senior Associate, PwC United Kingdom

Email +44 (0)7730 596649

by Helen Tsang Value Creation in Deals Senior Manager, PwC United Kingdom

Email +44 (0)7718 982156

by Gary Lam Value Creation in Deals Manager, PwC United Kingdom

Email 44 (0)7802 659368

by Tamal Bhattacharya Technology Consulting Senior Manager, PwC United Kingdom

Email +44 (0)7740 240866

 

The insurance broking market has been undergoing significant consolidation across the past 18 to 24 months. Whatever the strategic driver, brokers’ biggest risks come after the deal has been done: How can brokers realise value from a deal? How can they prove to shareholders that the value of the business hasn’t eroded?

To stay relevant in this highly competitive marketplace, brokers need to approach deals in a fundamentally different way: execute the end-to-end integration of their acquisitions; use the deal as a catalyst for transformational change; create value through a truly integrated business through one culture, one brand, one single shared service support model and one customer proposition.

To achieve this, we believe a broker’s integration programme needs to:

1. Build a scalable operating model that is fit for growth

Brokers need to build technology-driven capabilities to create an efficient operating model, free of manual processes. It should maximise the ability for brokers to focus on selling, and give support teams the right tools to service clients effectively.

Brokers need to future proof their business by building a scalable operating model to support future growth - whether through organic or inorganic means. This is particularly effective through a centralised shared service model for middle and back office functions.

2. Create a new identity / one culture

Brokers need to manage the sense of ambiguity and change that a merger will bring for their employees – this is crucial in this relationship-focused industry. Mergers in this sector bring about difficult challenges that we find are often overlooked by management; in truth, the intangible elements of any transformational event are often ignored.

A new culture and corporate identity needs to be established to bring staff together, while combining the best bits of each business: it is possible to develop ‘one culture’ while at the same time respecting the subcultures which are so integral to brokers’ operating models. This will drive staff behaviour from Day One; it unites everyone under a single way-of-working and plays a major part in removing staff uncertainty over the deal. Together, this will greatly boost the ability of the business to retain its key people, or else risk competitors picking up their disgruntled staff. In fact, the importance of culture in dealmaking emerged as one of the key findings in our Creating value beyond the deal report; we interviewed 600 C-suite Executives with Mergermarket and Cass Business School to understand how they create value in M&A. The report found that 82% of companies who say significant value was lost in their latest acquisition, lost more than 10% of key employees following the transaction. Clearly, it pays to place value on intangibles such as culture.

3. Maximise the return from your products

Brokers should look to streamline products where there is significant overlap and remove unprofitable lines of business. They should consider:

  • Complementary products – removal of such products may impact the quality of service offered to customers that purchase more than one product from the business.
  • Effective re-branding and communication - the market needs to recognise that products and brokers are being brought together under one brand.

For more information, please get in touch. Or, you can download our M&A report Creating value beyond the deal for further insights on different perspectives to realising the most value in dealmaking.

 

by Jeney Rajan Value Creation in Deals Senior Associate, PwC United Kingdom

Email +44 (0)7730 596649

by Helen Tsang Value Creation in Deals Senior Manager, PwC United Kingdom

Email +44 (0)7718 982156

by Gary Lam Value Creation in Deals Manager, PwC United Kingdom

Email 44 (0)7802 659368

by Tamal Bhattacharya Technology Consulting Senior Manager, PwC United Kingdom

Email +44 (0)7740 240866