With merger and acquisition activity heating up across the specialty lines segment, NU asked several wholesalers whether they had been approached to be acquired this year. While some said they had received invitations, the prospective dance partners remain choosy about their suitors, their responses revealed.
“Every week we are approached by somebody,” said Tap Johnson III, president of TAPCO Underwriters based in Burlington, N.C. “Sometimes, we listen to their price, but we've been saying no,” Mr. Johnson reported.
“To find the right strategic partner, it has to be a very unique combination. Not that we wouldn't, but it would be someone who really embraced our ideas,” he said, referring to the thinking behind an advanced technology model and call center that enable his firm to quote and bind a high volume of business on the phone in five minutes.
“A lot of companies are contrary to that,” he said. “They are full of bureaucracy. They are dinosaurs, as I like to call them.”
Frank Mastowski, president of Jimcor Agencies, said his Montvale, N.J.-based wholesale brokerage has been approached over the last several years–including this year–to be acquired by the large wholesalers.
In addition, he said one foreign insurer has approached Jimcor, but that no domestic insurers have contacted the firm with the possibility of an offer.
At Burns & Wilcox, in Farmington Hills, Mich., Alan Jay Kaufman, chairman, president and chief executive officer, said the current economic climate in the industry is conducive to acquisitions with Burns & Wilcox as the buyer.
“Acquisitions continue to be a key part of our growth strategy and have been for 30 years,” he said. “We continue to look for the right opportunities to expand the business, and consider both large and small companies,” he said.
John Wood, president of Shreveport, La.-based Specialty Risk Associates, said his firm has also grown by acquisition in the past. “We're constantly looking for an opportunity, but it has to be the right opportunity,” said Mr. Wood, who is also vice president of the National Association of Professional Surplus Lines Offices, Ltd.
“It probably took us 10 years of looking to find the right acquisition candidate to start with,” he said, referring to Specialty Risk's office in Baton Rouge. His firm's other two offices–in Jackson, Miss. and Grapevine, Texas–were also the result of acquisitions.
Finding the right candidate to get that first deal under his belt “took forever, it seemed like, but it was the right one and it certainly paid off,” Mr. Wood said.
In seeking out a firm to buy, he simply looked in states around Louisiana. “The thing that drew us so close was the previous owner. He had the same mindset. He cared about his employees. He cared about his reputation with his [insurance] companies, and his anchor company fit in beautifully with our organization.”
“He had some [insurance company] markets he could bring to us, and we had some we could bring to him.”
“It was just a hand-in-glove sort of fit there. It was perfect,” Mr. Wood said.
Like other wholesalers and managing general agencies, Mr. Wood's firm has been approached to be acquired.
“That's something you always think about, but I also enjoy being an entrepreneur,” he said, referring to the feeling of independence that he currently enjoys.
Reflecting some more on the prospect, Mr. Wood said, “Every day when I come to work, I think about what's my job. My job is to grow and improve the agency–and improve the value of the agency.”
“If you do that, things will take care of themselves in the long run,” he believes. “Whether I own [the agency] or someone came in and said I'd like to purchase it, you want the value to keep going up. You don't want to become stagnant,” he said.
(Additional reporting by Susanne Sclafane)
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