In Chinese lore, 2014 is the year of the horse, an ideal time for businesses to be bold, act swiftly and break new ground. This bodes well for OAMPS, which has proclaimed this year as one of growth.
The first sign of OAMPS’ increased focus on acquisitions came late last year, with the appointment of Sarah Lyons as Head of Commercial Broking Operations.
Formerly of UK Global Risk Solutions, Lyons’ experience includes integrating 22 acquisitions into the fold in just 18 months.
More tellingly, as IRP was going to print, predictions were swirling that its parent company Wesfarmers would imminently announce the float of the broking arm, composed of OAMPS and New Zealand’s Crombie Lockwood.
“We have been through a period of consolidation over the past few years, but OAMPS has a history of acquisition,” OAMPS CEO Mike Cutter says.
“The company was built on the back of over 140 acquisitions and now we want to turn our focus back towards growth. This year we intend to really put the foot to the floor in terms of meeting our growth aspirations.”
Amalgamation has become an increasingly large part of the broking industry in recent years, driven in part by increased competition and the economic advantages that consolidation can bring, not only in dealing with insurers but in backroom efficiencies.
This trend is expected only to accelerate as more and more of the babyboomer generation – plenty of whom own brokerages – hit retirement age and look to either downshift or leave the game entirely.
Steadfast and Austbrokers have been leading the charge in recent times, with each making a flurry of acquisitions last year. Both also have large reserves to fund future purchases, ensuring it is likely to be a seller’s market.
We have plenty of capital available to us to acquire additional broking businesses.
The competition comes from other quarters as well. A recent Macquarie Bank report found one in five insurance brokerages had made an acquisition, and three-quarters were currently in the market to either buy or sell.
OAMPS has signalled its appetite includes not just Australia but also New Zealand and the United Kingdom. Cutter says a priority is patching holes in their national coverage, including establishing “bricks and mortar representation” in Geelong, the central Queensland coast and south WA.
“We have plenty of capital available to us to acquire additional broking businesses but those businesses need to be the right fit for us,” he says.
“It’s difficult to integrate a business that has very different values to the prevailing values of the acquiring business, so we must ensure that anyone who we seek to acquire has the same ethos around collaborating across the network.
“Working as a team with the functional support areas and their peers in other groups is really important to us.
If we build a capability for one of our targeted industry sectors then we want to be able to consistently deliver that value proposition across the whole of the network, so that all members of our industry partners receive the same high quality of service wherever they are in Australia.”
Cutter is bullish about OAMPS’ prospects this year.
“The structuring of OAMPS – the fact our brokers are 100% owned – ensures we have very consistent capabilities across the whole country and can offer the same level of expertise and service to our clients regardless of their location,” he says.
“I think that’s really what sets us apart from our competitors who don’t have the same ownership structure: they can’t deliver the same level of tailored expertise that we can.”
Cluster group competitors
2013 was a big year for the cluster group behemoth, which bought equity in more than 60 businesses, as well as floating on the stock market.
It has $120 million on its books to finance new acquisitions, with a focus not just on brokerages but on underwriting agencies. More of its acquisitions are also set be consolidated in its growing number of ‘hubs’.
Last financial year, the Austbrokers powerhouse made 19 acquisitions, as well as increasing its stake in a number of its existing partner businesses.
It has a war chest of at least $25 million to fund acquisitions this year and has flagged an interest in expanding its operations outside broking and underwriting, demonstrated by its recent purchase of workers comp specialists Procare.
Recently appointed CEO David McKinnis says growth is critically important for Insight and believes the push by some other cluster groups to encourage smaller brokers to merge will help them find a market among those who wish to boost their competitiveness while still remaining independent.
He says he expects more authorised representatives to join as they move forward.
Although tied to Austbrokers through AIMS, IBNA’s focus on membership over equity makes it a different beast.
Finance and Administration Manager David Boursnell says although they have had two brokerages join so far this year, their goal is to expand not by attracting more members but through the growth of their member brokers’ businesses.
He says their membership numbers will likely remain relatively stable.