Scaling up: Ardonagh’s playbook for managing high-volume M&A in the insurance industry

How does one company successfully close high volumes of M&A deals year on year? That was the question we asked James Howe, an M&A Director at The Ardonagh Group, who is keenly aware of the unique challenges in managing high-volume M&A.

The Ardonagh Group, a global insurance broker with over 12,000 employees, has grown significantly through M&A, closing 68 deals in 2024 alone. We spoke with James about how his team is set up for success, the importance of cultural fit, and the regulatory hurdles of operating in diverse international markets. 

His insights shed light on the strategies and tools necessary to manage multiple deals simultaneously and drive successful growth in a fragmented industry.

Q. Could you please tell me about the Ardonagh Group in general and your role there?

Ardonagh is a global Top 20 insurance broking group that started out as a group of UK-focused insurance broking businesses. Our first overseas acquisition was in Ireland, which was shortly followed by acquisitions in Australia and the Netherlands. 

Subsequently, we expanded our global footprint through the acquisition of MDS which is a leading broker in the Portuguese and Brazilian markets, followed by further acquisitions in Switzerland, Cyprus, Chile, Italy and Greece. We’ve been highly acquisitive, with our international growth driven by M&A.

I’ve been supporting Ardonagh with M&A for a number of years and am now an M&A Director within the group M&A team. I’ve worked on a variety of deals ranging from transactions in the UK to significant acquisitions in Brazil and Australia. Lately, I’ve been more focused on our M&A operations, looking at which tools / platforms we use and our M&A process and strategy.

Q. When did deal-making become central to the company’s growth strategy? Has it increased in recent years?

We are an industry that lends itself to growth through acquisition. Insurance broking is a highly fragmented market, however, it’s a business that benefits from economies of scale. If two companies combine, they can benefit from core infrastructure benefits, and they also gain more bargaining power with both insurers and suppliers. 

Becoming part of a larger group gives smaller brokers access to greater opportunities and insurance products and allows them to benefit from economies of scale. Targeted M&A has been core to our growth strategy and alongside driving top-line revenue growth has also helped drive the Group’s recent enterprise valuation of $14 billion. 

Q. That sounds similar to the trends we’re seeing in sectors like wealth management and the legal profession.

Wealth management is a good example of a sector that has a lot in common with the insurance broking sector. Both sectors are very attractive to investors as they typically have high volumes of clients which provide diversification, alongside annual recurring revenue streams. 

The diversified client bases of these sectors help to reduce client concentration risk and by continuing to provide end clients with excellent service this ensures that client retention stays high. 

Q. On the operational side, roughly how many deals do you expect to do in a year?

We did 67 in 2023 and 68 last year, and deal volumes vary each month. Alignment on values and culture is a key part of our targeted M&A strategy so this means we explore more deals than we end up doing. 

Q. What processes do you have to ensure consistency across all of your deals?

That’s a good question. We have a group M&A framework that sets out our M&A methodology, the deal process that we follow, the tools we use including template financial models and investment papers.

Our central M&A team which is based in London, has oversight of all the M&A activity while teams in local platforms drive a lot of the M&A activities. 

We also have an M&A database which allows us to track deal stages alongside key deal metrics.

Q. In terms of sourcing deals, is this a central function, or is it up to the local teams?

We find that the regional teams are well placed to use their relationships in the industry to identify bolt-on M&A opportunities. People typically stay in the insurance broking business for a long time and build up great networks of contacts. A deal where there is an existing relationship is typically a good result as both parties are working with a business that they know already. 

The teams in our regional platforms have been very successful at identifying opportunities within their existing networks. We support deal sourcing with origination and execution in our central team where we are building new relationships or targeting regions that we don’t yet have a presence locally. 

Q. How do you assess the cultural fit when making an acquisition?

With companies where there is an existing relationship, you already have a good idea of how they are likely to fit. Where you don’t, it’s important that the teams spend time with each other, especially when the management team is remaining with the business.

It is also important to understand what the management team are looking to get from the deal. Sometimes, the management team might be the team that founded and grew the business and now are looking to step back from the business, however, in other situations management may be seeking a deal in order to become part of a larger group and be looking to move to an expanded role in the new organization. 

That’s especially true for the insurance broking sector as we’re very much a people business. Typically, the management team is a key part of the deals we look at, and as a result, not having a good cultural fit is a reason why we may choose to walk away. 

Q. When you’re doing due diligence, are there other red flags, any specific to your business?

Insurance is a highly-regulated industry and each of the different regions we operate in have their own regulators. We have to ensure that the businesses are meeting the regulatory requirements for their jurisdiction, which is a fairly black and white requirement. 

Similarly, we look to understand if businesses need to upgrade their IT infrastructure, and if so, whether this is something that can be addressed at or immediately after completion.

We try to identify any red flags early on because you don’t want to go into a full due diligence process and then, much further down the line, find out there’s a fundamental problem. 

Q. What are the biggest challenges of doing so many deals?

When you’re juggling multiple deals, it’s all about having the right platforms and tools in place. The M&A database I mentioned earlier is an integral tool for us to be able to manage multiple deals in multiple territories, and like Ideals, it provides us with one consistent platform that we can use across all of our territories. 

To help manage these challenges, making sure we are working with the best providers and partners is key. That’s why we invest time looking for the best partners to work with and then remain with them long-term and build relationships with them.

Q. How about the regulatory challenges of working in different markets?

If we have a presence in a particular market, we’ll leverage the local regulatory team within that region to oversee and be aware of the relevant requirements. For a new territory, we draw upon external advisors to provide that support. 

Q. How do you ensure that the post-merger integration processes are smooth and effective?

The process depends on the size of the deal. So, a bolt-on transaction will be very formulaic in terms of which actions are taken when, and we’ll use local integration teams. However, on a larger deal, other group teams often add their expertise.  

As an example, we recently carried out a transaction in Brazil where we leveraged the Brazilian team, the central team, and our Portuguese team, plus third-party support from a consultancy firm, as a result of the size and complexity of the transaction, which was effectively doubling the size of the business in Brazil.

Q. When you’re working across so many deals in so many different territories, how do you decide whether you personally get involved? Do large, higher-value deals take precedence?

Not necessarily. It comes down to the returns that the deals will generate. Typically, larger deals will have a higher price point and a higher valuation multiple and there’ll likely be a more competitive process because larger businesses can be used as a platform for either a strategic player or an investor to enter that region. 

Our focus is typically about acquiring complementary businesses which enhance our geographical footprint or product offering. 

Q. What do you think are the most important things to consider when you’re doing this number of deals?

Firstly, you need a team with both strong M&A experience and industry experience.

Secondly, you need central oversight of all deals, combined with regional expertise that can carry out the deals locally and manage any cultural or language differences, while getting support from a central team. 

Thirdly, you need to equip the team with the right best in class tools to deliver that M&A.

For businesses looking to execute high volumes of M&A globally, I think these are the key strands – a global M&A team with relevant experience and access to best-in-class M&A tools.