The acquisition of Hub International by private equity firm Hellman & Friedman came as a surprise to the insurance industry, but the trend towards larger and larger brokerages isn’t a sign that family-run businesses are doomed to extinction, says one broker.
“The Hub takeover was a surprise,” says Brian Purcell, a broker with James Purcell Insurance in Spencerville, Ontario. “But when I hear people say the small brokers will be gone, that’s where I have to disagree. With the technology that is out there, there are a lot of opportunities for a small broker to be successful and build great customer service. The customer service just isn’t the same with the big companies.”
Global private equity firm Hellman & Friedman LLC announced earlier in the week that it had entered into an agreement to acquire Hub, a global insurance brokerage that has been active in acquiring Canadian brokerages over the past few years.
The transaction that values Hub at approximately $4.4 billion will, according to Hub CEO Martin Hughes, allow members of Hub’s senior management to continue to have a significant equity position, with no operational changes being affected by the deal.
But for Brian Purcell, who along with his wife Colleen will be taking over the family business from his father James, the day of the small brokerage has many, many more years of potential left.
“I know I would want to be working my way up if I was in a larger brokerage, looking to have some share ownership,” he told Insurance Business. “It is a good carrot for a good employee who knows the business. But I like the autonomy of a family business. My wife and I are just now taking over the business from my dad, and my 13-year-old son says he wants to be an insurance broker. But we’ll wait and see if that stays the same.”
The personal touch of a family-run brokerage, mixed with the right modern technology, is the real recipe for success, says Purcell.
“We have direct billing set up with Aviva, but we still contact every client on a regular basis,” he says. “Sure people will get the bill and ask, ‘Are we still dealing with you?’ but by keeping in touch, it isn’t a problem.
Hellman & Friedman’s previous insurance transactions include reinsurer PartnerRe Ltd. and Sedgwick Claims Management Services Inc., and previous insurance deals include reinsurers Arch Capital Group Ltd. (ACGL) and GeoVera Insurance Group.
“We have long admired Hub and are delighted to partner with Marty and the entire Hub team," said David Tunnell, managing director of Hellman & Friedman. “Our firm has a longstanding history of investing in insurance businesses and we look forward to working with the company to support its next phase of growth.”
Hub employs more than 6,500 people in the United States (including Puerto Rico), Canada and Brazil. It is expected to achieve revenue of approximately US$1.2 billion in 2013, after the annualized impact of acquisitions.
