Think about your organization from the lens of a buyer. Put yourself in the acquisition seat for a moment. Now, what does your business look like?
Who is filling leadership positions? What talent is in place that you’d want to draft to your team? Do you see high-performing individuals who are future-focused, adapt to change and are interested in growth? Or do you see a lot of baggage and an org chart that you’ll be charged to fill with new employees if you buy in?
If you’re like most firms in this industry, people are the most important asset, and human capital is the biggest expense. Ironically, it is also the most often overlooked area when it comes to long-term strategic planning. Insurance firms actively focus on sales—and sales are critical. But what about the individuals who drive and support those sales? After all, any prudent investor needs leaders, producers, account executives and support staff. They need a team.
By managing your human capital now—investing in career development—you can position yourself to be in the decision-making seat when it comes time to either sell or perpetuate.
We know that most firms say they do not want to sell, but they ultimately will because their organizations are not prepared to continue the legacy. People are the key to perpetuation. So, if you run your business as if it is for sale and focus on human capital management today, you will put yourself in a position to have more choices tomorrow.
Here are some talent management focus areas to work on now to create a stronger, sustainable organization.
RUN A TIGHT SHIP. Divide your revenue by $200,000. In most cases that is how many people you should have on staff to run a lean, efficient firm. More people does not necessarily translate to more revenue. It could mean you have extra baggage. So take a good, hard look at your staff today and evaluate how each individual is contributing to your organization. Remember, unproductive employees can become an infection that negatively affects morale and the attitudes of your top-performing employees.
HIRE SMART. Review your recruiting practices. Do you have accurate job descriptions in place so you are hiring talent to fulfill roles your organization needs to grow? Where are you looking for candidates, and what processes are in place to onboard new hires? It is important to have someone own the recruiting process and approach hiring no differently than a producer would approach an active pipeline of new business prospects.
CREATE CAREER PATHS. Don’t be just another stop on a person’s résumé. Be the organization that invests in training and technology. Provide mentorship and ongoing education to advance team members’ career paths. Help your employees see ownership opportunities. Show them how they can be the next generation by using career mapping that illustrates how they can advance and what skills and performance are necessary to achieve the next level.
With these concepts in mind, take another look at your organization through the buyer’s lens. Assess the value, the talent, the potential for future growth. You have a choice: develop human capital today and decide your fate, or keep on with the status quo and let an acquirer help choose what’s next for your firm.
May and June deal announcements this year were up compared to not only April 2017 but May and June 2016 also. There were 38 announced May deals (33 in May 2016), and June saw 42 (37 in June 2016). This year’s pace has now accelerated past 2016’s with 239 transactions, compared to 222 through June 2016.
Acrisure continues to be the most active buyer with 24 deals through June, followed by BroadStreet Partners (19) and Arthur J. Gallagher (17). Hub International is a close fourth with 16.
Combined, these four buyers represent nearly 32% of all brokerage M&A deals so far in 2017.
In late June, USI announced it had won the bid to purchase the U.S. commercial and employee benefits insurance services division of Wells Fargo. It was rumored both Hub and Alliant were in the running for the business. The sale is expected to close late this year and will exclude the personal lines insurance division. USI previously purchased 42 insurance brokerage offices from Wells Fargo in 2014.
May 1 marked the first transaction for the newly formed Alera Group, announced in January as the combination of 24 independent agencies backed by private equity investor Genstar Capital. Alera purchased Pennsylvania-based Striewig Bonding Agency, which specializes in bonding and surety.
Also notable during May, Cleveland-based Britton Gallagher announced its sale to Acrisure. Britton Gallagher, with roughly 50 employees, is a multiline brokerage with niche specialties in several areas including pyrotechnics, life sciences and executive risk. This transaction marks Acrisure’s first entrance into the Ohio market and a departure from its typical approach of not announcing transaction targets to the public.
Trem is SVP at MarshBerry. Phil.Trem@MarshBerry.com
Securities offered through MarshBerry Capital, member FINRA and SIPC. Deal counts are inclusive of completed deals with U.S. targets only. Please send M&A announcements to M&A@MarshBerry.com. Sources: SNL Financial, MarshBerry