“It is a hugely difficult decision”; a few words from an email I received from a business owner a couple of weeks ago, about the decision of whether to sell or not. Quite rightly it is indeed a hugely difficult decision; most business owners have committed a large chunk of their life in building their business into what they are today. But the difficulty also explains why many business owners end up making poor choices around that decision.
Business owners will often frame the question in the terms of “to sell, or not to sell”. But in reality, it is usually about when to sell, rather than if. The decision is a complex one because it is not purely financial. Will a sale disrupt my business? Will my health and enthusiasm for work continue? What will I do with myself after I have sold?
The shift from being a “holder” to a “seller” does not happen overnight. Some elements of selling may be very appealing; the certainty of knowing your family future is secure versus the fear of what to do following a sale. The fear of this change is in part why people expend so much more effort in the business than thinking about or planning their life after or outside it.
Poor choices? Appointing an adviser is a serious commitment. It is a clear expression that one’s business is for sale. It will involve some upfront costs (actually typically quite small, but will Susan in accounts put 2 and 2 together?). Much easier just to respond to a direct and unsolicited approach from somebody who you already know, sign an NDA and provide some information. Unwittingly one becomes drawn into discussions. In the beginning it all seems so easy. But then suddenly one finds oneself talking about an offer, there is a price and a structure, then exclusivity. It becomes hard to pull out. Have I got a full offer? Is the buyer the best for my business? Will the earn-out work?
Buyers will all admit – perhaps through gritted teeth – that sellers should always be advised. They confess to us that they “have a little party” when they find a seller who is unadvised. And what do those buyers do when they come to sell themselves? They appoint an adviser to create competitive tension and secure the best deal.
Business owners need to stay focused on managing their business, especially if there is an earn-out. By taking the difficult decision of talking to an adviser early on – indeed ideally some years before they actually come to sell – ensures crucial decisions lead to good choices. Buyers have extensive deal experience. Most sellers do not. Working with the right adviser puts them in charge of the process.
Insurance
After a muted January, February marked another quiet month for UK Insurance M&A with only six new announced transactions to report on.
In commercial broking, Global Risk Partners – itself the subject of quite a few headlines during the month owing to rumours that PE backer Searchlight, who invested in GRP in 2020, is now seeking an exit – announced the acquisition of Hamilton Fraser, a broker best known for its expertise in Landlord and Cosmetic Insurance and employing more than 200 staff. Specialist Risk Group also announced its second deal of 2022 with the acquisition of Hamilton Leigh, a commercial broker in Borehamwood with expertise in the motor trade and the technology sectors.
In the Lloyd’s market, wholesaler BdB, which includes the Mithras Underwriting businesses, announced that it had agreed to sell its operating companies to Brown & Brown Inc., the leading US brokerage firm. Brown & Brown is perhaps not familiar to everyone in the UK market, but is a top 10 broker globally with aspirations to do much more here. Watch this space.
There were two transactions involving Health Insurance businesses during the month, with Aston Lark announcing it had acquired Healthwise Group in the West Midlands, and GRP-owned Premier Choice Healthcare acquiring the trade and assets of Amba Care & Wellbeing
Finally, it was reported that AXA UK&I had acquired the renewal rights to Ageas UK’s commercial business for £47.5m, with around 100 Ageas UK employees to transfer to AXA as part of the deal. The transaction will see Ageas UK focusing on its personal lines businesses going forwards.
During February IMAS published its UK Insurance Distribution Annual Review for 2021. The 65-page report provides the most comprehensive analysis of recent sector M&A and market structure available anywhere. The report can be downloaded as a pdf here.
Investment
The Investment sector saw continuing consolidation activity, especially in the wealth management sector, but also in asset management. The newly launched DFM consolidator, Titan Wealth, acquired Harrogate-based independent stockbroker and private client investment manager, Cardale Asset Management, adding £1.5bn in AUM. AssetCo acquired Revera Asset Management for £2.8m, as part of its plan to establish an active equities business, adding £118m in AUM. M&G acquired TCF Investment to become a provider of model portfolio services and Carphone Warehouse founder David Ross bought a 10% stake in WH Ireland, the listed wealth manager and corporate broker.
In the IFA sector, Kingswood made a trio of acquisitions, buying Joseph Lamb, Aim Independent and Allotts Financial Services for £15.3m, £3.6m and £2.5m respectively, while Perspective Financial completed the acquisition of Beanland Financial Services and Progeny announced the acquisition of RU Group, expanding its presence in south Yorkshire and the east Midlands.
Elsewhere in the sector, FNZ secured $1.4bn in new equity funding from Canada Pension Plan Investment Board and Motive Partners, valuing FNZ at more than $20bn. Private equity group Cinven acquired International Financial Group, a life insurance provider of cross-border, long-term savings products, with £19bn in AUA.
Plenty of rumours circulated in the market, including that Brooks Macdonald approached 7IM’s controlling shareholder, Caledonia Investments, about a takeover of the investment manager and platform provider towards the end of last year, valuing 7IM at £300m, which was rejected. It was also rumoured that Tilney Smith & Williamson is planning an up to £3bn sale or IPO, as its private equity owner Permira seeks an exit.
A couple of proposed transactions were also called off. Mutual insurers Royal London and LV= ended talks about a possible merger, just two days after both companies confirmed they were in discussions. Also, after having agreed its £3.7m acquisition of Morgan Financial Group Holdings in January, Tavistock Investments announced that it had terminated the deal and will therefore not complete it.
Lending
In a relatively quiet month, Atom Bank raised £75m in new equity from BBVA, Toscafund and Infinity Investment Partners. The financing round saw the bank valued at £435m as it gears up for an initial public offering next year.
In the property sector, Selina Finance, a London-based Home Equity Line of Credit (HELOC) fintech business, raised $35m in equity from Lightrock and $115m in debt from Goldman Sachs and GGC. Peer-to-Peer property lending platform Blend Network, secured £10m in a late-seed round of financing from a group of existing and new investors. Beaufort Capital and Pollen Street Capital formed a strategic joint venture to provide senior debt finance to high quality real estate developers.
Elsewhere, Pepper Money closed its largest residential mortgage-backed securitisation (RMBS) to date, backed by £450m of mortgage loans. Arbuthnot Latham signed a three-year, £250m strategic loan origination agreement with Aeon Investments for commercial real estate lending.
*IMAS Corporate Finance LLP has been acquired by MarshBerry.
