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Cooper Gay makes approach for NMB

Cooper Gay Swett & Crawford is demonstrating its continued appetite for M&A by making an approach for independent London market broker Newman Martin and Buchan (NMB), The Insurance Insider can reveal.

According to sources, Cooper Gay and NMB have held preliminary discussions about the possibility of a takeover.

However, it is understood that talks are yet to progress beyond an early stage.

The completion of Lightyear Capital's investment in Cooper Gay is thought to be a necessary precursor for any deal.

If Cooper Gay were to acquire NMB it would represent a further consolidation of the independent broker space in London following recent deals that took out Windsor and THB.

NMB, which specialises in North American business, delivers market-leading margins that outstrip even highly respected peers Lloyd & Partners and RK Harrison.

In the 12 months to 31 March 2012, NMB improved operating margins by almost 900 basis points to 34.4 percent while achieving strong top line growth. NMB has frequently been the subject of takeover speculation in recent years, as observers suggested that the group's eponymous founders were looking to cash out their stakes.

Barry Buchan, Gordon Newman and the Martin family still own 40.7 percent of the business, according to its last return.

As previously revealed by The Insurance Insider, Lightyear Capital's proposed investment in Cooper Gay is thought to be worth hundreds of millions of dollars.

Despite its relatively modest size, Cooper Gay is likely to need substantial firepower to take out NMB due to the latter's stellar earnings record.

Rule of thumb valuations for quality businesses can run from six or seven times earnings up to around 10 times, implying a takeout value in the range of £70mn-£110mn.

Cooper Gay's last substantial M&A deal was in 2010 when it acquired US wholesaler Swett & Crawford.

In 2011 Cooper Gay had revenues of $344mn and underlying pre-tax profits of $69mn.

NMB declined to comment. Cooper Gay could not be reached for comment.

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