Giants can benefit from pause

Andrew Tjaardstra

Oval's decision to call a "summer break" on acquisitions is a sign that the fervent consolidation of the last three years could be slowing.

Raising fresh capital at favourable interest rates is proving harder by the day and this factor has been partly responsible for the cancellation of Candover's proposed investment in Towergate and Towergate's postponement of its own refinancing. In addition, the cost of buying brokers has risen dramatically and now, with insurers talking a hard-ball game over commissions and the announcement of significant job cuts at Norwich Union (1,800) and Zurich (900), the acquisition party may be about to end. However, there is still a pile of money in certain brokers' bank accounts, or in their investors.

Intriguingly, Oval decided to give its cheque book a rest following six months of public due diligence with Perkins Slade, a broker that has long been sought after; it is hard to believe that a lack of funding could have been an issue as it seems an ideal fit, however, if that is true then it is a significant development but one that will help Oval to reflect more on the businesses that it has already bought.

Consolidators have long been criticised for failing to integrate their operations properly but there are signs that this is changing. Giles announced that it is combining a recent acquisition, Shephards, with its Beckenham office to create a hub in Orpington, while Jelf has appointed Mark Nevitt to integrate Clarke Roxburgh into the group. These small changes and attention to detail are necessary to try to drive the organic growth so craved by the consolidators. Meanwhile, Towergate has closed Paymentshield's Edinburgh offices, signalling that it has an appetite to keep its costs under control.

In these times of economic uncertainty, it could prove good business practice for the consolidators to adopt a wait-and-see approach to acquisitions and to instigate some much needed integration; do not hold your breath, though.

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