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Human element critical to a successful broker acquisition

19 October 2011 Genesis Capital

Acquiring any new business can be fraught with risk as well as presenting opportunities. However, with the trend for consolidation in the short term insurance space continuing apace, there are some key factors that businesses can take to ensure the process is not only smooth but can also help to create a sustainable and amicable working partnership for all stakeholders.

Clint Harker, Managing Director of Gen-Assist Insurance Brokers, says that while a lot of cognisance is paid to the price of acquiring a brokerage, often far less attention is paid to personnel issues. “Very often, the human element is forgotten in such acquisitions. A lack of understanding on the role that organisation development can play can be hugely detrimental to a potential acquisition. It is vital to engage in some form of organisation development work before, during and after the acquisition process as this will also help in dealing with the softer issues.”

“Some smaller brokerages may have one client that generates 40% of their income, so it is vital that a complete understanding of the portfolio is known from the outset.”

Harker says other key considerations when acquiring a brokerage are the economies of scale that can be achieved, as well as cost saving opportunities in terms of centralising functions such as compliance, accounts and human resources. “Effective integration of a company’s IT systems is also critical as there should really be only one operating system in place.”

He says an ‘our way or the highway’ approach, which is sometimes the avenue that companies take, can result in missed learning opportunities that could be used to improve the business. “Engaging with people is critical in order to determine what their process and policies are and we look to adopt these processes into our organisation to see if there are any opportunities from which we can also benefit. We also look for skills gaps within both organisations to identify how a merger could strengthen both organisations.”

Common issues that every business should consider are risk mitigation and due diligence, which are vital to ensuring that no restraints of trade would jeopardise a potential merger. “For those considering selling a brokerage there are also a number of factors that need to be considered including but not limited to the price. This includes whether one wants to sell the business as a going concern, whether they want to retain some form of shareholding as well as whether the acquiring organisation values the knowledge and skills that the company already has or whether they are purely buying it for an additional income stream.”

“Besides an attractive buying or selling price and what liabilities are being transferred, at Gen-Assist Insurance Brokers we also look at the current leadership team and working relationships between employees as well as identifying if there is a reasonable cultural fit amongst the teams.”

“We believe in making money by working with people, and not making money from people. If there is a common objective and an understanding of the strategy, then the successes are shared far more easily between the two organisations.”

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