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Global re/insurance M&A activity forecast to increase: KPMG

20th March 2017 - Author: Marianne Lehnis

Financial advisory firm, KPMG, said insurance industry mergers and acquisitions could see a hike this year after 84% of companies surveyed said they had 1-3 M&As in the pipeline.

Out of the 200 global insurance industry leader survey participants surveyed, one-third said adapting their business model to deal with the emerging market space was a key motivator for M&A activity.

KPMG Global Lead Partner for the U.S. Insurance Deal Advisory, Ram Menon, commented; “Insurers are clearly hungry for good M&A opportunities, they are focused on transforming their business and operating models, and even with geopolitical uncertainties, they are aggressively looking at deals that can help meet their objectives.”

Asia-Pacific is the top region identified for M&As, with 47 percent of participants saying they were looking into the area for acquisitions.

Although the U.S. takes the lead as the key target for acquisitions on a national basis, followed by China.

KPMG said Western Europe is viewed as presenting the most divestiture opportunity.

Most industry leaders surveyed said they viewed partnerships as being vital for  “operational transformation,” especially when attempting to harness new technology infrastructures.

The survey brought insurer’s “opportunistic approach” to M&A’s to light, with nearly half the industry leaders surveyed saying dedicated M&A teams hadn’t matched their deal objectives with the company’s corporate strategy.

Over one-third of participants admitted to making reactive M&A decisions.

Commenting on the opportunistic M&A trend, Menon said; “If you are using M&A to effectively transform your business, you can’t just jump at opportunistic deals, you need to be much more strategic,” noted Ram Menon. “Insurance organizations need to make investments that deliver on the longer-term strategy for the organization. And that is where the big challenges will lie.”

According to the report, corporate venture capital has become a growing factor in insurance deal-making; 62 percent of insurers said they had corporate venture capability to build technical capabilities, or were in the process of setting it up.

More than a quarter of the existing venture capital funds claim more than US$1 billion in allocated funding.

KPMG Global Strategy Group, UK Insurance Sector Lead, Matthew Smith, said he saw merging company objectives as vital to  M&A success; “In this environment, the key to M&A success is to align financial, business and operating models so that you can achieve clarity about the markets and geographies you wish to play in and how you will win.”

“You must also be prepared to analyze your capabilities in the areas of due diligence and targeting in order to understand how to extract maximum value over the medium term and how the target’s capabilities complement your own.”

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