Miracle grow: Acrisure reveals formula for M&A success

Global broker Acrisure is growing at “a phenomenal rate” with 132 mergers and acquisitions (M&A) last year and expectations for the firm to buy a similar revenue volume again this year, its president of insurance Grahame Millwater has said.

“Last year we made 132 acquisitions, this year that number doesn’t matter, but in terms of the actual volume of revenue that we buy, this year it will be fairly similar.

“It may be that we buy slightly larger firms this year, so it doesn’t matter whether it’s 132, 75 or 100, the driver of those M&A is fundamentally the quality of the firms we can find,” Millwater told Intelligentinsurer.com.

This focus on M&A quality will be no surprise to anyone who has been watching Acrisure’s deals in the first quarter of 2022. In January it bought managing general agent (MGA)  Appalachian Underwriters, which is very US-orientated, and in March it acquired international MGA  Volante Global.

A happy marriage

“An MGA naturally sits with Acrisure,” Millwater said, because the firm has “massive distribution” with a focus on the small and medium-sized enterprise sector.

He pointed to the broker’s highly diversified portfolio, with close to $30 billion of premium going into the market. “We deal with all types of underwriting capital, with global and national US insurers, we put business into Lloyd’s and we deal with reinsurers and fronts.

“All that will continue but at the same time, given that distribution, why wouldn’t we want to marry that with our own, effectively, MGA platform where appropriate?”

Rather than build an MGA internally, the firm decided to buy some high quality MGAs, he explained.

Appalachian and Volante are both highly respected businesses in their own right and deal with third party distribution as well as Acrisure. Millwater highlighted another “high quality MGA purchase”, the workers’ compensation MGA SUNZ. And there are more deals like this in the pipeline “to build out that MGA platform”.

“One of my specialities has been bringing underwriting capital to bear on MGAs. One thing you have to understand about MGAs is they need their underwriting sanctity,” he said.

“We will heavily protect that because sustainability of an MGA is all about delivering to its underwriting capital. But for those MGAs to have the benefit of access to Acrisure’s distribution and third party distribution, plus our ability to avail ourselves of underwriting capital married to those MGAs, it’s a very good model.”

Global expansion

Marking the broker’s entry into the Brazilian market, in October 2021 Acrisure bought the  large Brazilian broking firm It’sSeg.

Following this transaction, Millwater said: “A lot of people ask: ‘What’s your strategy? Are you going to put flags here, there and everywhere?’. Yes, we do want to build an international business.

“We’ve bought businesses in the Netherlands, Spain and Italy, now Brazil, Bermuda and the UK, as well as the acquisitions we’ve made in the US.

“The predominant first question we ask ourselves is: ‘Is this a quality business?’. Then: ‘Does it fit the footprint we’re looking to do? Does it fit the segments we’re looking to build in?’”

In the case of It’sSeg, Millwater is delighted to say that the deal met all the criteria. “It’s led by a first-rate individual; he’s built a very good business and from our perspective Brazil is a very large market.

“This is a business with a first-rate reputation within the Brazilian market, so if we’re going to expand that business in Brazil, you want to do it from a platform that has a fantastic reputation.”

More to growth than pure M&A

With all this M&A activity it is no surprise that the broker is growing at a “phenomenal rate”, as Millwater described it. The firm made $38 million of revenue in 2013, which has grown to $3.5 billion of revenue today, he said.

“In eight years we’ve made that trajectory and that trajectory continues. A lot of the background is M&A but the other thing to remind everybody is that our organic growth rate has always been above average within the sector.

“It’s not just an M&A story, it’s also a story of organic growth. And we’re hoping 2022 will be as good a growth year as 2021.”

Warming to his theme, Millwater emphasises that the firm is “unique”, saying that people underestimate the difference in Acrisure.

“We’re a business almost 80 percent owned by its employees, so sometimes people mistake us with a private equity company. We’re not, we’re privately owned, and privately owned by over 1,500 of our employees,” he explained.

This high percentage of employee ownership is due to the attractiveness of Acrisure from a longevity point of view, he explained. “When you join Acrisure you join forever! You don’t join a private equity firm that then wants to exit in three years’ time.”

Part of the reason behind this strong growth is the firm’s attractive model, he said, but he acknowledged that M&A plays a big part too. “There’s no doubt that we’re seeing firms around the world wanting to effectively monetise, to some extent, the value they’ve created. But the other issue there is a story of scale.

“A lot of smaller firms are realising that in a world of technology, data, complex risk, necessary access to product and access to global underwriting capital—that comes with scale,” Millwater said.

“If you’re going to choose a scale partner to join, why wouldn’t you join Acrisure? The only issue we find is that some of the prices are interesting at the moment and that continues.

“But we tend to get beyond that because when we can have a conversation with people, particularly if the management team wants to have an ongoing leadership role, Acrisure makes a lot of sense,” he concluded.