Outlook for M&A in 2021
Deal Advisory - 2020 review and outlook for 2021
Insurance Broking M&A going from strength to strength
The UK Insurance Broking (“IB”) M&A outlook for 2021 is fascinating, especially following the contradiction that was 2020.
2020 saw the initial impact of global factors in Q1 providing the IB sector with a similar backdrop to that of every other sector, resulting in an initial drop-off of activity at the end of Q1/beginning of Q2. However, after the first couple of months of ‘Lockdown MK-I’ saw some significant deals still being completed, there followed a great flurry of transactions that lasted throughout the rest of the year.
The main deal doers were the usual suspects of UK consolidators, reaping the rewards of a variety of macro-economic factors such as uncertain economic futures, ownership age profiles and potential future tax burdens for owners. However, we have also seen a great deal of foreign investment driving deals, and private equity has been very active in both the insurance broking sector and services to the insurance broking sector.
2021 sees no expectation that this high level of activity will slow down any time soon.
Our deal pipeline shows a large number of insurance transactions that are scheduled to complete in Q1, with further deals panning throughout the rest of the year. Entrepreneurial owners of brokers are obviously going to be watching HMRC carefully up to and during March, but whatever happens from that perspective, the circle of M&A activity that surrounds the broking world will continue… the large, diverse and global levels of funding available, coupled with the attractiveness and stability of the sector will ensure that!
As an aside, some of the various top level structural changes that have been seen in recent times within the dominant regional consolidators may result in some form of diversification during 2021, through recently acquired teams either spinning away or new set-ups being created by gaps being formed by the consolidation – regenerating more independent brokers for the future.
The hardening market is a great opportunity for good brokers to do well, and the 2021 financial performance for those brokers with strong books of business should be positive. As a result, M&A price expectations will be retained at high levels.
Finally, it is hoped that the Covid-19 Business Interruption litigation that the Supreme Court has just decided on in favour of policyholders does not have negative repercussions for the broker environment. However, this should not be completely ruled out in these strange times!
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