Consolidation

It is difficult to identify any business sector where consolidation has not been a dominant force in the past decade or so. Consider consolidation internationally, in the Bank, Insurance, Investment Firm or Stock broking sectors. It is only necessary to look at the reduced numbers of Insurance, Assurance and Stockbroking companies for the scale of consolidation to become apparent.  Such was the desire to consolidate one such sector, that the Credit Union Regulators set up a central exchange to support consolidation of Credit Unions.

We believe that it is now the turn for the Independent Brokerage sector to carry out its own consolidation.

Regulation

Globally it is often considered that regulation is important, so long as it doesn’t “affect my business”. Following the banking crisis in Ireland, any regulation perceived to be light touch in nature was always going to be replaced by a more intense and “fit for purpose new model”. The impact has been significant in that the Regulator clearly envisages a much smaller marketplace than the current 2,000 or so regulated firms. This regulation increased associated costs and forced many to exit the sector, thereby achieving that right-sizing.

A Buyer’s Perspective

Organic growth is a tried and tested growth strategy. Where this strategy sometimes struggles is through the speed at which growth can be achieved and the associated cost of that growth. In a densely populated marketplace, like the independent brokerage sector, the competition for organic growth can be fierce, squeezing margins and thus making organic growth relatively expensive.

In order to achieve growth there is a noticeable trend toward buying that growth through acquisition, with capital becoming more readily available on relatively reasonable terms.

A Seller’s Perspective

The landmark event for Ireland came after 2008 with the collapse of the economy and through the banking crisis. The fall-out from that event is still with us, particularly in the independent brokerage sector. Firms have fought to stay in business and stay relevant in the intervening years and many owners are now at stages of their life when, having fought so hard for so long to survive, they are realising that their next growth strategy is either going to take time (if organic), or renewed financial investment (if by acquisition). Often neither appeals so selling becomes the preferred course of action.

A Customer’s Perspective

There is an historic centralised “retirement” deal for brokerages who wish to exit the sector. This “insurance buy-back” model has encountered challenges making it difficult to sustain.  However, it has always been clear that long-standing customers have had difficulty transitioning from a central personalised service provider across all products and services (their broker), to a series of less personalised providers - each individual life company.

Which Are You?

In a nutshell, if you own an independent brokerage and are finding regulatory compliance to be challenging and expensive, or you are at a stage when new investment or new organic strategies don’t add up, then bxi can find a buyer for you.

If you are an independent brokerage and want to acquire growth but don’t want to take too long term a view, you might decide to acquire a business and utilise today’s lower interest rates to exploit improved lending terms which will add further value to your acquisition then bxi can assist you too.

If you want to sell a specific “book of business” as part of a right-sizing exercise within your business (perhaps you are an accountancy firm transacting financial services), bxi can also help.