What to plan for when brokerages merge

If you manage a brokerage that has merged, don’t forget to tell every employee why the transaction took place and what the end goal is, brokerage leaders who have been through the process said Thursday.

“I don’t think, in any situation, in any acquisition in which I have dealt, that somebody complained that they were over communicated to. So a lot of communication is critically important,” said Rod Campbell, director and CEO of Jones Brown Inc., a Canadian brokerage acquired in early 2019 by the world’s fourth largest commercial brokerage, Itasca, Ill.-based Arthur J. Gallagher & Co.

“It is important to communicate what the vision is for the combined entity and why the transaction makes sense for everybody in the organization,” Campbell said during a panel discussion on mergers and acquisition trends in the insurance sector at the Metro Toronto Convention Centre.

Moderator Michael Carolan, senior vice president of corporate finance at KPMG Canada, asked panelists what challenges they have encountered with integration after an acquisition and what are the pitfalls to watch out for.

“I think you can bolt together the financial systems and bolt together the IT systems. They are all big projects that require a lot of discipline – but you have to get the culture right and you have to get the communication right,” Campbell said during the breakout session at KPMG Canada’s 28th annual insurance conference.

Co-panelist Neal Stratton, chief financial officer of Westland Insurance Group Ltd., said when his firm buys another brokerage, they ask whether the person selling their brokerage wants to stay in the business and whether key staff at the seller want to have meaningful roles in the combined entity.

Surrey, B.C.-based Westland places home, auto, business and farm insurance from more than 130 offices in B.C., Alberta and Saskatchewan.  Westland bought First West Insurance Services this past September.

“We want to make sure we get the people right first and then the integration of system comes afterwards naturally,” Stratton said Thursday of how Westland integrates the brokerages it acquires. “If you don’t get the people right, if people don’t feel like their teams are being taken care of, that they are joining a culture that’s like theirs or better – then the rest of it won’t work,” said Stratton.

Also on the panel was Lowell Pancer, managing director at Marsh & McLennan Companies. New York City-based Marsh & McLennan acquired London-based Jardine Lloyd Thompson Group Plc earlier this year for US$6 billion.

Pancer told KPMG conference attendees Thursday what questions buyers should be asking.

“Almost from the first conversation you have to start thinking about – when we start fitting these businesses together how is that going to look?” said Pancer.

“How does a principal in a brokerage want to conduct themselves for the next three to five years or longer? What do they see for their people? How are they going to fit together? How are you going to market? What is the brand name? All of these are elements that feed into integration.”