In two years’ time, do you expect your company to have different owners? That was the question compère and Last Word group editorial director Dylan Emery asked an audience of senior life company executives at International Adviser’s Fund Links Forum 2016 CEO roundtable.
With two of the four roundtable panellists’ companies having recently undergone significant M&A activity, the question could not have been more pertinent. Voting anonymously, 31% of the audience said they thought their companies would change hands, which the panel agreed was a realistic expectation.
Costs and benefits
Investors Trust Assurance chairman Bob Pain warned that too much consolidation could result in less choice but added it could also deliver benefits. “It is giving companies that were unprofitable or struggling the opportunity to become stronger,” he said.
“I am between parents,” said Mike Foy, managing director of recently acquired and soon to be rebranded Axa Wealth International. Bought by Life Company Consolidation Group (LCCG), he said the private equity firm had brought a new dynamic to the business.
“LCCG is keen to know what can we do faster, smarter, better; what it is that is stopping us and how can we get it done. It has been a breath of fresh air.”
RL360° chief executive David Kneeshaw said he was on the acquisition trail “in principle”, but added, “You cannot dictate where and when it is going to happen.”
The way companies come up for sale is not a “natural gestation”, Kneeshaw said. “There are a lot of investment bankers who live or die by doing deals. They actively go around markets pushing big companies to offload subsidiaries. It is not that company owners always have a plan.”
But for Walter Jopp, chief executive of Zurich International Life, the decisions of larger insurance groups also shape the market. “Large insurance groups have to decide whether their international operations are of sufficient scale to warrant keeping them within the group.
“If a company is of sufficient size, and the group values it, it will be kept. If the group believes it is not part of their strategy, then they will sell the company and reinvest that money elsewhere.”
Responding to concerns expressed by Pain that too much consolidation would reduce consumer choice, Foy said that there are two types of M&A deal. “There is ‘change of ownership’, which we have gone through, and there is true consolidation, which I think would be bad for the markets, as Bob said.
“Under the new ownership we have remained a provider in the markets we were in. But equally our new owner could have folded us into something else, which would not have been good. Consolidation that crashes providers together, reducing choice for advisers and customers, would be bad.”
Life companies are not alone in facing these issues, said Foy. “We have seen platform and IFA firm consolidation. The whole market is in flux at the moment.”
The inking of a contract is just the first step in the M&A deal, and the focus of the roundtable debate soon turned to the process where a company either integrates another firm into its business, or faces being integrated itself.
