MarshBerry UK managing director John Nisbet (pictured) is expecting “a flurry” of new M&A (merger and acquisition) deals in the UK insurance distribution market between now and October 30, when the new Labour government is anticipated to announce a less favourable capital gains tax (CGT) rate.
In a MarshBerry blog, Nisbet pointed to the possibility of a surge in transaction volumes in the coming weeks as those looking to sell try to get them in before any upward adjustment in CGT.
“There is currently an unusual level of enthusiasm among sellers to finalise deals before October, and we expect to see a flurry of new deal announcements between now and the Autumn Budget,” the UK managing director noted.
“Whether such a spike results in final 2024 deal volumes exceeding 2023 will depend on how far M&A activity drops immediately following the Budget. Many transactions are currently being accelerated to beat the October deadline by businesses that may have sold later in the year (rather than unexpected new deal activity).”
Nesbit added that the prospective rush could also mean that the first half of next year would be ‘quieter’ on the M&A front.
While revealing his M&A volumes prediction, Nisbet also analysed the trends being observed this year, including who’s selling and how big the transactions tend to be.
“An interesting highlight in 2024 has been the number of larger deals that have involved insurance carriers divesting distribution businesses,” he pointed out. “Allianz and Liberty Mutual have both recently sold sizeable UK broking businesses, and in August it was announced that Zurich has agreed to sell its Navigators & General marine managing general agent business to Geo Underwriting (part of Ardonagh).
“There are far fewer distribution businesses sitting within UK carriers than there used to be. But such business units, which are often non-core and unloved or overlooked by their owners, remain a continuing source of acquisitions for broking consolidators who generally – and with some justification – believe they can manage them more effectively than a carrier.”
Size-wise, Nisbet cited an ongoing shrinkage, with over 60% of all announced transactions this year having been for businesses with estimated values under £5 million.
He said: “The targets remaining available to consolidators are getting smaller. This continues to present challenges for the larger firms, where small deals don’t really ‘move the dial’. The shift in focus of many UK buyers towards Europe, where the stock of available medium and large targets is more plentiful, reflects this.”
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