Mergers and acquisitions take many forms. The professionals give them different names, often with their own acronyms: Mergers of equals (MoE), bolt-ons, management buy-outs (MBOs), buy-ins, farm-outs, cash, all-paper, cash-and-paper. No two deals ever seem to be labelled quite the same.
Then there is the deal rationale. This also comes with a whole dictionary-full of vocabulary: Succession, consolidation, growth-fuelling, scale, presence, roll-up, knockout, control premium, bolt-on, synergies, diversification benefits, distribution, platform-buy, seat at the table, strategic, trade-buy, growth investment, now-or-never.
Times change and as they do the rationale switches, or at least the prominence which the boards of buyers and sellers give to each factor behind a transaction changes. Ten years ago, deals were about growth, diversification and getting a seat at the right global tables.
While growth and diversification are never far from the surface, these days synergies are much nearer the top than they used to be.
Scale, and the economies it can allow you to make, is trumping most other factors.
An M&A roundtable without M&A would be a bit strange, but happily we are in the middle of one of our industry’s periodically frenetic bouts of deal activity and that is why we decided this topic merited a roundtable of its own this year.
As we sat down in the bowels of the Fairmont Hotel, we had a myriad of questions swirling around in our heads. With hindsight, have many consolidation deals of the past really been distressed deals in disguise?
Were the type of deals where big global insurance carriers buy smaller wholesale, specialty and reinsurance operations set to continue?
Would an independent quoted Bermuda specialty and reinsurance sector still exist in five years’ time?
How much had the effective minimum size of a standalone carrier increased to?
Had scale and diversification trumped specialism and individual excellence?
With deal valuations cooling, would private equity come more into play in carrier M&A?
Given the blurring of ILS and traditional reinsurance of the past 10 years – was convergent M&A now likely?
Were pure reinsurers a dying breed?
On the intermediary side, there were lots of questions that also needed airing.
Had MGA and broker valuations peaked?
What might cause the private equity love affair with intermediaries to come to an end?
After such strong growth in company formation, is the MGA world now ripe for major consolidation?
Was buying an MGA now a more effective way of buying underwriting talent and intellectual property than buying a balance sheet carrier?
Meanwhile, there was the growing acceptability and utility of run-off as an adjunct to deal-making, InsurTech and many other topics to air.
Happily, a browse of the guest list to the right of this column is a who’s who of shakers and seasoned dealmakers. They wasted no time in getting to work.
I commend this succinctly edited summary to anyone wishing to get to the heart of what is happening in the varied and active deal landscape of 2018.
To view the M&A Roundtable supplement, please click here.
Mark Geoghegan, Editorial Director, The Insurance Insider