To sell or not to sell? Between the acquisition season sweeping the insurance industry, the growing understanding of COVID-19’s impact on the bottom-line of businesses and the burgeoning concern that Capital Gains tax might rise in 2021, this is the question that is sure to be on the mind of many insurance brokers throughout the UK.
Deciding whether or not to sell a business is one of the toughest decisions any leader can make and any outcome should be well-informed and advised by as many neutral parties as possible. A glance at your LinkedIn feed, however, can often reveal that there is little neutrality when it comes to the matter of consolidation. The subject draws passionate and persuasive debate from two diametrically opposed schools of thought heralding consolidation as either the future or the downfall of insurance broking, and there seem to be few bridges linking the arguments.
From the perspective of someone without a horse in the race, it seems that three key aspects should be keenly observed before any ‘For Sale’ sign goes up. The first question is the one that needs to be at the heart of all the decisions made by brokers – Is this the right thing for your clients?
To be the kind of brokerage with the client base and regional reach that another business is looking to buy, it is a safe bet that client centricity is inbuilt into your business model. And therein the question lies – what is that has brought clients to your door, and will this be maintained following a merger or acquisition?
The benefits of consolidation when it comes to offering an expanded range of products and services to clients are undeniable and the provision of a more seamless insurance experience through cross-selling opportunities is evident. What insurance brokers must contend with is the question that only they know the answer to - how important is it to your customer that their broker remains an independent voice in the community, and how will any change to this weigh against the advantages a partnership will bring?
Simply put, if the answer to the question is anything less than a definitive ‘yes’, then it should be the end of the conversation.
The second question that must form the basis for any acquisition discussion is – Is this the right thing for my staff? Employees are the lifeblood of any business. A brokerage doesn’t start without them and it doesn’t evolve without them, so how could any successful acquisition take place without staff wellbeing at its core?
The COVID pandemic has driven home the role that employees play in the development of a business. The adaptability that broking staff have displayed throughout the crisis has shone through in so many ways, including in their rapid shift to remote working, through to the net promoter scores which many insurance businesses have seen increase over the last 10 months.
Any acquisition will inevitably impact your staff and it is only in the long-term that it will become wholly clear whether that impact has been positive or negative. As a business leader, the people who have helped build your business deserve your full consideration – so carefully examine everything from access to advanced systems and technology, to relocation opportunities, to the chance to become trained in new product lines.
On the flip side, anybody who has ever been part of an acquired firm can tell you that, certainly the initial transition, is a time fraught with uncertainty. This is where the need for impeccable communication between the management team of a brokerage and its staff comes to the fore. It is only through a frank discussion of the needs and expectations of your people that you can safely answer ‘yes’ to this second question and continue to consider all the potential paths forward your business could take.
From the above, it might seem that the entire decision-making process is wed to the concept of utilitarianism and, indeed, making a decision designed to benefit the largest number of people is a good place to start, but it’s not the end of the road. So, is this the right move for you? Whether you are the brokerage’s founder, or MD, or a shareholder, this question cannot be ignored. All too often, the very real people and the very real financial and personal pressures that they face fall by the wayside when the industry discusses the rights and wrongs of consolidation.
The question of whether it is the right move to sell your business is not simply one which demands you evaluate the role you want your business to play in the broking community. It is also about questioning whether now is the right time to sell, and whether or not the right buyer has come along yet.
The financial services industry is no stranger to stories of acquisitions gone wrong and resulting in either financial losses and/or lawsuits, and to acquisitions that have gone extremely well – who could imagine ‘JP Morgan’ without the ‘Chase’ these days? But if you are considering selling your business, you are likely well-versed in the compelling arguments both for remaining independent and for being part of a larger organisation, and the final decision will always fundamentally be a personal one.
I contend that, against popular belief, consolidation cannot be painted as either a net positive or a net negative thing. As a concept, it is simply a constant, as inevitable and unchanging as the tide. Consolidation only becomes a bad thing when it happens on the backs of people being forced out of a marketplace – when people answer ‘no’ to any of the above questions and still have to decide to sell.
This is unnatural to the insurance broking ecosystem and will inevitably create problems down the line. Consolidation works at its best when it is perfectly balanced by a steady pipeline of new market entrants ready and willing to cement the place of independent brokers operating in local communities.
