Brand strength is expected to be the strongest driver of M&A deals over the next three years, reflecting the re/insurance industry’s transition to digital sales, which require a strong, recognizable brand, according to a survey by Willis Towers Watson and Mergermarket.
The survey shows the most powerful motivation for undertaking an acquisition over the next three years will be to gain a strong brand.
Willis said this reflects the impact that technology and the Internet in particular have had on the insurance industry, with the web being the primary distribution network for companies.
The survey also revealed a trend of fewer insurance M&A deals being transacted, but those that do complete generally being of higher value than those of previous years.
Willis said this M&A trend follows “a time of heightened political uncertainty.”
Data shows that global deal value across all sectors increased by 8.4% in H1 2017 while volume sunk by 12.3%.
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.
17% of firms expect at least one of their acquisitions over the next three years to be a major deal -a percentage that’s doubled from the 8% of firms that made a major acquisition in the previous three years.
In addition, the survey found that firms that have been most acquisitive in the past demonstrate the most interest in further future deals, Jack Gibson, global M&A lead, Willis Towers Watson M&A Risk Consulting, said 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.
“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.”