Private equity piles into broking

Andrew Tjaardstra, editor, Professional Broking

The amounts being spent and raised by insurers and brokers on acquisitions hit mind boggling proportions this week after Chris Giles, chief executive of Giles Insurance Brokers, revealed he has been given access to around £500m to grow his business.

Giles’ backers Gresham private equity and Norwich Union sold up to private equity house Charterhouse Capital Partners for £185m including debt. Gresham bought into Giles in July 2006 and raised its stake in September last year to over 40% at the same time Norwich Union acquired a 7.5% stake. Chris Giles will retain 20% of the shares with his management and staff retaining a further 15% between them. Giles has been a long time admirer of Towergate and has plans to expand his £200m gross written preimum broker into a £1bn giant. Something that Phillip Hodson, chief executive at Oval, is also targeting.

Charterhouse’s entry follows rumours that private equity house Candover is about to team up yet again with Peter Cullum at Towergate, and 3i QPE’s significant investment in the Jelf Group. The broking sector is appearing extremely attractive to these groups in these times of market turbulence and hidden losses. It may also not be a coincidence that Peter Cullum appeared as Entrepeneur of the Year in Management Today magazine earlier this year.

Just as Giles was beginning to plot what he was going to do with all that money – broker owner-managers expect a phone call shortly - he missed out on SBJ which is set to be bought by Axa’s broking arm Venture Preference. The London-based broker is 51% owned by another private equity house Capital Z, bought in November 2004. If completed, the move will add over £300m of gross written premium to Venture Preference although its large corporate book will not sit neatly with VP’s predominantly SME presence. SBJ, which has around £80m of reveunes, also has a large book of employee benefits.

With so much consolidation, or potential for consolidation, I would like to add one thought. What if all the small to medium sized enterprises that brokers insure all consolidated as well? Then there wouldn’t be much business to go around! I think Neil Walton, chief executive of City-based broker Centor, is right when he says in this month's PB Interview: “Independent brokers are the darlings of insurers.” Long may this continue.

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