UK Broking Sector Set For Third Consolidation Wave

Specialist Corporate Finance Adviser Hines has said the UK broker market remains in a state of flux with more questions than answers as we head into 2020.

The company has produced a new report into the section in which it has has assessed the trends in the market and the potential challenges and opportunities that lie ahead.  They believe we are now seeing a third wave of PE-backed insurance broker consolidators emerging, and as such there is ongoing uncertainty.

“Notwithstanding the recent political and economic uncertainty in the UK and overseas, there has been a steady flow of M&A activity within the UK insurance broker market over the last 12 months, driven by the continuing theme of consolidation,” explained Jack Stewart, Partner at Hines. “We count 93 publicly disclosed UK insurance broker transactions to date in 2019, with many more which have either not been disclosed or are yet to be announced.”

As such the firm believe there are key questions that need to be addressed in the months to come.

  • Where are we in the consolidation cycle and have valuations peaked…or will the ongoing PE competition in the market and the availability of debt capital on attractive terms continue to drive valuations?
  • How will impending regulatory changes impact the industry – both operationally and financially?
  • What is driving the divergence in valuation levels between large consolidation vehicles versus smaller standalone brokers?
  • How do consolidators identify targets, and what do they look for?
  • How important is integration and synergy generation for broker consolidators?

Mr Stewart, added: As we begin a new wave of consolidation in the UK insurance broking market, we have paused to assess the direction of travel and have spoken to senior industry figures to obtain their views on key themes and what the future may hold.”