They say beggars can’t be choosers; however, it seems acquirers can be picky – this being the case in the first half of 2017, with mergers and acquisitions (M&A) data showing an 8.4% rise in global deal value across all sectors and a 12.3% reduction in volume.
According to brokerage giant Willis Towers Watson, whose study was conducted together with Mergermarket, the same trend has been observed in the insurance industry. The particular sector saw a 17.7% drop in deal volume in the first half of the year, while deal value registered a whopping 170% increase.
As for what’s driving M&A activity, the survey found that 68% believe brand strength will be the strongest force in the next three years. Willis Towers Watson said what this signifies is the transition to digital sales, as you need a strong and recognisable brand when distributing via digital channels.
“M&A in the insurance industry will be driven by the need to create synergies, build brands, and tackle technological advances,” noted Fergal O’Shea, EMEA (Europe, the Middle East, and Africa) life insurance M&A leader at Willis Towers Watson. “However, as our survey shows, companies will be searching for quality over quantity.”
The brokerage giant said having a solid brand when transitioning to digital sales can be just as important as competitive pricing, with a major acquisition paving the way for a company to reinvent and reintroduce itself to the market.
“Lower rates of insurance among millennials also mean that insurers must work harder than ever to win business, and this increases the value of effective branding,” it added.
Amid increased focus on growth, Willis Towers Watson said dedicating resources to capital optimisation, as well as understanding efficient capital utilisation for value protection and creation, will prove beneficial for insurance firms.
“Caught between the ongoing pressures of tepid growth in premiums, low interest rates, and the burden of regulatory requirements, insurers must ensure they are making the most efficient possible use of their capital,” commented O’Shea. “Those who pay the closest attention to their strategic aims, and how managing their capital and pursuing M&A can underpin those goals, will have the best chance of success.”
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