Are we at IMAS about to be replaced by Artificial Intelligence? I asked ChatGPT “Is selling your business stressful?” It raised six points in response. The first was “Emotional attachment: As a business owner, you may have invested a significant amount of time, effort, and passion into building your business. Letting go and separating your personal identity from the business can be emotionally challenging.” It concluded with “Engaging with professionals like business brokers, attorneys, and accountants can help alleviate some of the stress by guiding you through the process and ensuring a smoother transaction.” Pretty good really – we’ve been saying similar things in this newsletter for many years.
When I enquired about who should buy a particular type of business ChatGPT’s advice was very broad and as a result unhelpful. Asked to choose between two buyers the advice was similar to how the curate commented on his egg. Not the unambiguous advice our clients are looking for. So, for the moment I am not expecting to receive my P45.
However, ChatGPT is absolutely correct about the importance of a smooth transaction. Most transactions involving privately owned financial services companies involve an earn-out. Disputes, typically over minor matters, or misunderstandings can sour ongoing working relationships. Clients in the past have become upset about the cost of making dilapidation provisions in a sale contract that represent less than 0.1% of the value of the upfront payment they are receiving for the business. Perhaps an underbidder in the same process could have taken a different approach, but if their offer was 10% less than the winning party, then the 0.1% is just a rounding difference.
Lawyers are vital to a sale process but can increase stress levels by raising issues that may be technically correct, but commercially wide off the mark. This ranges from informing clients that “earn-outs never work” (our experience is quite different – good buyers are only too keen to ensure they do) to raising – completely misguided – concerns about a particular buyer’s solvency and associated credit risk in the example I am thinking about the purchaser was listed on the NYSE with a market capitalisation of more than $10bn.
An important part of our role is to keep everybody focused on the key commercial issues and give highly specific advice based on the specifics of each transaction.
Selling a business is a life changing event for most vendors, so it is bound to be highly stressful. But that stress has to be managed so it does not undermine the transaction itself.
Part of ensuring that a sale process runs smoothly is to prepare for it. Consequently, we are always delighted to engage with owners long before an actual sale is envisaged. We look forward to hearing from you.
Insurance
Following a very active March and April, there was a marked reduction in the number of newly announced M&A deals in UK insurance during May, albeit with one major new transaction taking place and several smaller deals to report on across the broking and MGA segments.
The headline grabbing deal during the month was of course the acquisition of Kentro Capital (which comprises MGA platform Nexus and credit specialist Xenia) by Brown & Brown, the US-listed group that also owns Global Risk Partners. The transaction, with a value of just under £400 million, marks another major acquisition of a UK business by a US buyer, a continuing trend that IMAS has been reporting on extensively over the past couple of years.
In another MGA deal in the month, Bspoke Group (which comprises the old UK General and Precision Partnership) announced its first acquisition since it received private equity backing from RCapital last October, adding Miramar Underwriting, an MGA based in London and writing mainly property classes of business.
As usual, there were a number of new add-on deals announced by several of the ‘usual suspects’ in commercial broking. Specialist Risk Group added TLO Risk Services, a broker specialising on serving the legal profession. US group AssuredPartners announced a deal for InEvexco, a specialist in Kent focused on insurance for events, exhibitions, and conferences. J.M. Glendinning announced its 20th deal since 2020, adding Insure Business Services in Newcastle. And Jensten Group acquired Coversure Poole, an existing franchisee.
While the major consolidators are heavily focused on deals for control, there are still alternatives for sellers seeking only a partial sale. During the month The Broker Investment Group, the vehicle chaired by Peter Cullum, announced a new minority investment (49%) into Mayfair Insurance & Mortgage Consultants, a broker in Bedford.
IMAS makes every effort to capture and report on every relevant transaction in the segment as they happen. Indeed, we have proprietary technology that helps us do this. Most sector deals are publicly announced and picked up in the trade press. But not all of them. Some buyers like to keep under the radar, but of course still need to make relevant filings with Companies House. So here’s a little scoop. Inflexion-backed DR&P Group has been on a recent roll, with three new (unannounced) transactions during March and April. They have done deals with Berry Insurance Brokers in Preston, Radius (I.B.) in Hull, and Sector Associates in Thirsk, collectively adding more than 30 new staff to the group.
Investment
M&A activity in the Investment sector in May was largely driven by continued consolidation in the wealth management sector, including Hurst Point Group’s acquisition of Helm Godfrey, adding £1.0bn in AUM and £0.5bn in AUA, and Titan Wealth’s acquisition of Ravencroft’s UK-based investment management business with £600m of AUM. Private equity firm Foresight Group invested £6.7m in Manchester-based Five Wealth, which has £670m of AUA, to support equity release for existing shareholders and provide additional growth capital and Fairstone increased its AUA by £450m with the acquisition of Essex-based Sacre Associates. Perspective Financial acquired four firms, namely, Tees Valley Asset Management, P Bennett & Associates, Oak Financial Management and Marlborough Place, expanding its presence in Northern Ireland, and bringing its total acquisitions in 2023 to eight. Wren Sterling also expanded into Northern Ireland with the purchase of Ralston Bennett Financial Planning and its appointed representative business, Aspects Financial, both based in County Down, as well as the acquisition of St Helens-based Callisto Wealth. There was also further activity in Scotland, with Succession Wealth acquiring Edinburgh-based Spence & Spence, increasing its AUA by £170m, and Gilson Gray Financial Management purchasing Dundee-based Wilson Financial, marking its fourth deal in the last 12 months.
Elsewhere in the sector, London-listed investment trust Civitas Social Housing agreed to a £485m all-cash offer by CK Asset Holdings and Lansdowne Partners acquired fellow London-based asset manager Crux Asset Management, adding £1bn in AUM. Private equity firm Sovereign Capital Partners announced the acquisition of a majority stake in chartered accountancy and financial advisory firm LB Group and London-based savings and investment technology platform, Smart, raised £75m in a Series E fundraise led by Aquiline Capital Partners.
*IMAS Corporate Finance LLP has been acquired by MarshBerry.
