Almost 70% respondents in Willis Towers Watson’s M&A survey believed brand strength will be the main driver of M&A in the next three years, reflecting the transition to digital sales which requires a strong and recognisable brand.
The survey, prepared in conjunction with Mergermarket, covered 200 senior-level executives in the insurance industry, splitting equally across the Americas, Asia and the Europe, Middle East and Africa (EMEA) regions. Forty-two percent of those surveyed work predominantly in the life sector, 42% work in the P&C sector and 16% work in the health sector.
Deal volume in the insurance industry fell by 17.7% from the first half of 2016, while value has increased by 170% over the same period, said the survey. In comparison, global deal value across all sectors grew by 8.4% in the first half of 2017, while volume sunk by 12.3%.
The majority of respondents (78%) expect to undertake one to two purchases in the next three years, compared with 90% that made one or two acquisitions in the past three years, according to the survey.
This move toward larger insurance M&A deals and megadeals can be seen in the split of deal sizes. In 2016, there were only 14 deals worth more than $500 million. In the first half of 2017, there were already 11. This trend corresponds with the survey findings, which show that 17% of firms expect at least one of their acquisitions over the next three years to be a major deal compared with 8% that have made one such acquisition over the previous three years.
Insurance firms that have been most acquisitive in the past anticipate the most future buy-side activity. Of those firms that have made between one and two deals in the past three years, 81% expect to make the same number of purchases in the next three years. Of those that made between three and four deals in the past three years, 44% expect to make three or more deals in the next three.
“This seems to signal that insurance M&A activity will continue to be driven by serial acquirers and those that have been active in recent years, as opposed to new entrants that have sat out the past few years finally sticking their toe in the water,” said Mr Jack Gibson, Global M&A lead, Willis Towers Watson M&A Risk Consulting. “A number of companies have made large acquisitions in the past two years and have been in integration mode. Once that completes, they can turn from being internally focused back to M&A.” M