B&B Builds Via M&As After Going Public
One insurance brokerage that has been very, very busy executing a lot of mergers and acquisitions–especially in the past year–is Brown & Brown, Inc.
Unlike others who made a periodic announcement, a month never seemed to slip by last year that the Daytona Beach, Fla.-based firm did not announce a couple of mergers. If others had more, they were not vocal about it.
The firm executed 26 deals last year, and a total of 86 since the brokerage went public in 1993, noted Cory Walker, Brown & Browns chief financial officer.
"We are not a consolidator; we are an operator of insurance agencies," explained Mr. Walker. "We have made acquisitions with people like us who want to be profitable. That is why most [agencies] come to us. We did not set out at the beginning of the year to make a number of acquisitions. We do them as the opportunity presents itself. One commonality our acquisitions have is that they are very profitable, well-run agencies run by entrepreneurial-type people like Brown & Brown."
Mr. Walker described the firm as a very lean, decentralized sales and service organization. The attraction to a takeover target is that agencies retain their sense of autonomy after joining B&B, while plugging into the firms insurance markets and services, accessible through Brown & Browns 140 branches.
The agencies also gain access to capital to help them grow, which was augmented by a recent stock offering of additional shares garnering $150 million.
In return, the agencies must bring their drive and motivation to be competitive and profitable. "When we go through the due-diligence courting period, we find that those who do not work hard or do not want to grow as an agency would not want to be with our type of culture," Mr. Walker observed.
The firms profit center managers and producers participate in a performance stock incentive plan in which they are awarded shares based on how their book of business does, Mr. Walker explained. This gives everyone a stake in the success of the company and allows them to benefit financially as the brokerage grows. He said that agents sometimes see their portfolio grow to more than double their commission book size.
"Nobody gets value unless the stock grows," Mr. Walker pointed out. "We are all in the same boat and rowing as fast as we can. That is why we have so little turnover in our group, and high production."
He added that by providing such incentives, "we raise the bar on ourselves each year, and that is the core that makes Brown & Brown successful."
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 1, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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