Acquisition Acumen
By Brad Unger
WHO’S IN YOUR CORNER?
Seek out experienced advisers who specialize in the business issues you’re confronting
As a leader in your business, you make hiring decisions all the time. Adding to your team is a continuous endeavor as you build a bench of talent. But one of the most valuable “hires” a firm can make when considering acquisitions is to invest in an experienced adviser. The next most important thing you can do is listen to that person’s advice.
A consultative professional who understands your industry, your business, your clients and the marketplace can position you for success. And I’m not just talking about financial advisers; there are various advisers who need to participate in this process.
Every business “feels” different, and a culture match is ultimately what makes a good deal great.
I was reminded of this following a recent transaction where two attorneys were negotiating an acquisition. One attorney, representing the buyer, was a partner at a reputable firm that focuses on merger and acquisition (“M&A”) transactions and knew the marketplace. The other lawyer, representing the seller, was competent, but his practice was not centered on these types of deals. However, he was a relative of the seller so there was a trust factor at play. The buyer, who retained the firm specializing in M&As, went to the table confident that their representative knew the market, the players and the selling company’s nuances much better than the seller himself did.
So, how did the deal turn out? The experienced lawyer guided a deal that benefited the buyer and ultimately “won” at the table. That firm knew the game and both the written and unwritten rules and could navigate what was worth fighting for and what wasn’t. They knew the market terms and conditions, and they were aware of the risks in these deals and how to mitigate them.
As we move into 2020, now is an ideal time to step back from your business and assess what talent gaps exist. Do you need to focus on raising capital? Will you consider making acquisitions or selling your business—and, if so, whom can you trust to walk you through the process? As you consider this, keep in mind a few advantages of enlisting an outside professional:
Knowing the players. Experienced advisers understand the players in your market and their personalities. They understand the various negotiating styles and what is important to their counterparties. This is incredibly helpful during an M&A transaction, because the adviser knows how to push and when to give.
Assessing company culture. Every business “feels” different, and a culture match is ultimately what makes a good deal great. Experienced advisers understand the business models of the companies they are evaluating. They are quick studies in assessing the culture and adopting a negotiation style to make a deal move smoothly. They can also recognize when a culture is not a fit.
Understanding market terms and conditions. Market knowledge may allow a business to react faster and compete in challenging circumstances. M&A advisers, lawyers and even some accountants understand market terms and the M&A landscape and can draw from past experience to drive the right outcomes for a deal. Because markets are constantly evolving, advisers who are dedicated to keeping up with changes can deliver true value to their clients.
Businesses need different types of advisers as they grow and evolve. Those can include accounting advisers or CPAs, attorneys and specialized tax advisers who know what is reasonable and permissible. Some advisers focus on growth, while others develop sales processes or customer service protocols. There are advisers who specialize in M&As and work intimately with businesses as they vet opportunities, perform due diligence and facilitate transactions.
Solutions are out there.
When it comes to your business needs, who has your back?
The author
Brad Unger joined Marsh, Berry & Co., Inc. (“MarshBerry, in 2015 as a vice president on the Mergers & Acquisitions (M&A) team. In addition to his M&A advisory responsibilities, Brad also is involved with the firm’s financial consulting business. MarshBerry helps insurance agents, brokers and carriers as they work to maximize their value through a variety of industry-specific services. Contact Brad at Brad.Unger@MarshBerry.com or (440) 220-5435.
MARKET UPDATE
A total of 2,678 deals were announced during the past five years (2015-2019) compared to 2,545 announced transactions between the prior 10 years (2005-2014). A total of 132 additional deals, or 5.2%, were made in half the amount of time.
Focusing in a little closer on 2019, 387 of the 642 (60.4%) announced transactions were completed by private-equity-backed brokers. The percentage of these PE-backed transactions is virtually equal to that of 2018 (59.1%). In 2019, independent agencies were responsible for 153 of all announced transactions in the United States. This buyer segment was more active in the market compared to the prior year, growing from 19.7% of all 2018 deals to 23.9% in 2019.
Acrisure, LLC, Hub International Limited (“HUB”) and BroadStreet Partners, Inc., made up the top three most active domestic buyers in 2019, completing a combined 23.1% of the 642 deals announced for the year. The top 10 most active buyers are responsible for 321 of the 642 total transactions (51.4%). This group includes eight PE-backed brokers and two public brokers—J. Gallagher & Co. and Brown & Brown, Inc. In total, we saw deals completed by 194 different buyers with 144 firms completing only one transaction.
Notable Q4 activity
On November 20, 2019, Aon plc (NYSE: AON) announced that it has entered into an agreement to acquire insurtech startup CoverWallet. CoverWallet was formed in 2016 and has raised more than $40 million in venture capital by building a platform aimed at streamlining how business owners manage their commercial insurance. This transaction has strong strategic synergies for both firms, as Aon plc intends to include CoverWallet in the portfolio of its New Ventures Group in order to leverage the expertise and capabilities of CoverWallet. Aon anticipates this will accelerate core business growth while improving the effectiveness of its digital client experience. The deal is expected to close in Q1 of 2020.
HUB announced its acquisition of SilverStone Group on December 4, 2019. SilverStone is the largest insurance broker in Nebraska, and it will be the platform on which a new regional hub, called Hub Great Plains, will be formed. This acquisition was said to be an example of how bullish Hub is on the growth it has been experiencing.
Investment banking services offered through MarshBerry Capital, Inc., Member FINRA Member SIPC and an affiliate of Marsh, Berry & Company, Inc., 28601 Chagrin Boulevard, Suite 400, Woodmere, Ohio 44122 (440.354.3230) Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only. Scorecard year-to-date totals may change from month to month should an acquirer notify MarshBerry or the public of a prior acquisition. 2019 data is preliminary as of January 10, 2020, and may change in future publications. Please feel free to send any announcements to M&A@MarshBerry.com.Source: S&P Global Market Intelligence, and other publicly available sources
