“We have walked away from numerous enterprise”

Amid fast-paced mergers and acquisitions (M&A) throughout the insurance coverage business, organizations usually admit to prioritizing robust financials and a strategic match. However which is a “make-or-break” consider a transaction?

For Arrowhead Applications, a part of Brown & Brown, tradition isn’t only a buzzword or a development – it’s the inspiration of long-term success in M&A.

The MGA, which just lately rebranded from Nationwide Applications, manages round $7 billion in premiums, making it one of many largest gamers globally, in response to chief technique and analytics officer Jimmy Curcio (pictured). The division operates round 30 places of work and 60 packages, and it’s quickly increasing by way of acquisitions.

In an interview with Insurance coverage Enterprise, Curcio defined that Arrowhead Applications’ decentralized mannequin, acquired companies function independently, however the core tradition stays constant.

“We’ve walked away from numerous enterprise, numerous offers which have had actually robust financials,” he mentioned. “You possibly can have the strongest financials on this planet. In case your tradition isn’t robust, it’s not going to work out with us.

What query can assist decide cultural misalignment in M&A?

Mergers and acquisitions are a big a part of Arrowhead Applications’ technique, however the technique of evaluating companions and integrating new companies into a bigger group isn’t with out its challenges.

Curcio acknowledged that surprises can emerge in the course of the M&A course of. “There’s at all times going to be issues that you simply didn’t decide up on in diligence or a dialogue, proper? That at all times occurs,” he mentioned.

To mitigate these surprises, Curcio mentioned Arrowhead spends a big period of time attending to know the individuals they’re buying, each on knowledgeable and private stage. They emphasize the significance of constructing private relationships and going past the numbers to grasp the individuals behind the enterprise.

One technique the corporate has carried out is bringing collectively leaders from potential acquisitions with their inner group for roundtable discussions. This permits each side to see how they work collectively and whether or not there’s a cultural alignment.

“We’re at all times bettering on our course of,” mentioned Curcio. “One key lesson is ensuring we spend sufficient time attending to know the individuals concerned. In a deal course of, there are sometimes a number of consumers, and sellers are busy with conferences. So, how do you make sure you get to know the individuals?

“One method we have began utilizing is getting our individuals and their individuals collectively. We’ve got a progress and innovation group, made up of leaders in analytics, operations, advertising, and expertise. We sit down with potential acquisitions to speak by way of targets and challenges, and see if we can assist.”

Expertise has additionally taught Curcio some classes about recognizing early warning indicators of cultural misalignment. He identified a easy however telling query they ask in preliminary conferences: “What are your high priorities?”

If a potential accomplice doesn’t point out their individuals or their success, it’s usually a purple flag.

“The oldsters which might be proudest, who you possibly can inform are pleased with what they constructed… these are those that additionally appear to have profitable companies,” Curcio mentioned.

Insurance coverage M&A purple flags and classes

Finally, Curcio suggested fellow leaders to by no means sacrifice tradition for monetary beneficial properties and to make sure potential acquisitions can combine culturally.

For Curcio, cultural alignment isn’t only a field to tick off throughout due diligence however an important a part of the decision-making course of. This people-first philosophy drives Arrowhead Applications’ M&A technique in addition to its core values. “Do our people get alongside? And it’s a two-way avenue. Do they like us?” he mentioned.

Publish-COVID, distant and hybrid working environments have solely underscored the impression of cultural alignment amongst acquired companies. The problem is guaranteeing the “secret sauce” of the group’s tradition stays intact with out conventional workplace dynamics like so-called “water cooler” interactions.

Nonetheless, Curcio additionally doesn’t consider in a “good match” between a brand new acquisition and a dad or mum firm. As an alternative, insurance coverage leaders ought to guarantee cultural variations don’t contradict the prevailing organizational values, even when the brand new entity operates in another way.

“Everybody’s going to have their very own tradition. We simply wish to ensure that it doesn’t contradict our tradition,” he mentioned.

What are your ideas on tradition versus financials in insurance coverage M&A? Please share your feedback under.