He’s a CEO with £24m burning a hole in his pocket but Charles Taylor boss David Marock isn’t in a great hurry to spend it.
After a rights issue in March 2015, the professional services firm gathered around £28.9m after expenses, then used the funds to purchase insurance software provider Fadata for just north of €5m in July last year.
“We’ll have around £24m or so still available for acquisitions directly from what we raised then, in addition, we have access to further funds. Our constraint isn’t going to be our ability to fund a deal now, our constraint is actually finding a deal where the company feels like a good strategic fit,” Marock said.
It is the combination of ‘fit’ and price that has kept the firm cautious on more acquisitions, not the possible deals he sees coming across his desk.
After a rights issue in March 2015, the professional services firm gathered around £28.9m after expenses, then used the funds to purchase insurance software provider Fadata for just north of €5m in July last year.
“We’ll have around £24m or so still available for acquisitions directly from what we raised then, in addition, we have access to further funds. Our constraint isn’t going to be our ability to fund a deal now, our constraint is actually finding a deal where the company feels like a good strategic fit,” Marock said.
It is the combination of ‘fit’ and price that has kept the firm cautious on more acquisitions, not the possible deals he sees coming across his desk.
“I always used to feel we were seeing the dregs, bluntly, and then over time we just increasingly have seen better,” he said.
“There are some players out there, be it private equity or very large commercial organisations, that are just willing to pay over the odds. As an organisation we’re ultimately quite financially prudent, and as a consequence that’s been our challenge, if you like.”
He said the publicly-listed company is having discussions in “a number of areas” but wouldn’t be drawn on which, adding it was looking at support services, adjusting and management, as well as on the life side.
“There are some players out there, be it private equity or very large commercial organisations, that are just willing to pay over the odds. As an organisation we’re ultimately quite financially prudent, and as a consequence that’s been our challenge, if you like.”
He said the publicly-listed company is having discussions in “a number of areas” but wouldn’t be drawn on which, adding it was looking at support services, adjusting and management, as well as on the life side.
“We’ve beefed up our team internally in a variety of different ways, so that we have the capacity to both investigate those opportunities and then, assuming one of them comes off, to then be able to integrate it into our business, post-acquisition,” he said.
“We’ve got the capacity to do it, we’ve got the funds to do it, and it’s just a question of time, when the right opportunity converts.”
Consolidation on the rise
The insurance services industry at large is going through some consolidation but in comparison to moves in other sectors in previous years, such as the broking sector, Marock says it is far slower.
“If I look at what Towergate did, it probably consolidated faster. And, as a space, it probably isn’t happening as fast as that. But the direction of travel is clearly that way,” he said.
“My sense is to really get full value, whether it’s an existing core business or whether it’s an acquisition. You have to spend the time and energy to integrate the people, to make it part of our business, to get the culture right for long-term success. Otherwise, you just end up being an amalgamation of independent firms.”
According to Marock given the fragmentation globally of insurance support services, the size as well as the company’s approach is driving its success.
In its 2015 results, profits at Charles Taylor grew in all sectors based on prior year figures, with group revenue up to £143.4m (2014: £122.4m), except for loss adjusting, which faced a tough year across the wider market.
“We’ve got the capacity to do it, we’ve got the funds to do it, and it’s just a question of time, when the right opportunity converts.”
Consolidation on the rise
The insurance services industry at large is going through some consolidation but in comparison to moves in other sectors in previous years, such as the broking sector, Marock says it is far slower.
“If I look at what Towergate did, it probably consolidated faster. And, as a space, it probably isn’t happening as fast as that. But the direction of travel is clearly that way,” he said.
“My sense is to really get full value, whether it’s an existing core business or whether it’s an acquisition. You have to spend the time and energy to integrate the people, to make it part of our business, to get the culture right for long-term success. Otherwise, you just end up being an amalgamation of independent firms.”
According to Marock given the fragmentation globally of insurance support services, the size as well as the company’s approach is driving its success.
In its 2015 results, profits at Charles Taylor grew in all sectors based on prior year figures, with group revenue up to £143.4m (2014: £122.4m), except for loss adjusting, which faced a tough year across the wider market.
Despite bringing in £59m in revenue (2014: £56.1m), the segment saw operating profit decline from £2.2m in 2014 to £1.7m. However, Marock said the general environment has been benign.
“If you look at Charles Taylor Adjusting, the revenues in that business are actually growing every year for the last number of years. And if you think about many other adjusting businesses whose revenues have fallen off a cliff, you’ve got to ask why is that happening? And it’s because our clients, even when there’s less work around, are choosing to say, ‘I still want to have the best people managing us in the most professional way, serving our clients,’ he said.
The 2014 acquisition of Knowles Loss Adjusters, a move Marock said fitted “culturally” with the company but targeted comparatively smaller losses, pushed up revenue for the firm.
When it comes to future acquisitions in this sector, both geographic and technical skills will be strong drivers but he added: “We’re very careful that what we’re not looking to be is a mainstream commodity play.”
“Right now, we’re looking at things that are smaller. But when I say smaller, it’s relative to what we typically do. Ultimately, for us, we need to be able to differentiate ourselves by the quality of our people, by our technical expertise, by our passion for client service. Those things have to really matter, both to the people we’ve got, but also to the clients that we use. So we’re going to only look to play in areas where that makes sense.”
“If you look at Charles Taylor Adjusting, the revenues in that business are actually growing every year for the last number of years. And if you think about many other adjusting businesses whose revenues have fallen off a cliff, you’ve got to ask why is that happening? And it’s because our clients, even when there’s less work around, are choosing to say, ‘I still want to have the best people managing us in the most professional way, serving our clients,’ he said.
The 2014 acquisition of Knowles Loss Adjusters, a move Marock said fitted “culturally” with the company but targeted comparatively smaller losses, pushed up revenue for the firm.
When it comes to future acquisitions in this sector, both geographic and technical skills will be strong drivers but he added: “We’re very careful that what we’re not looking to be is a mainstream commodity play.”
“Right now, we’re looking at things that are smaller. But when I say smaller, it’s relative to what we typically do. Ultimately, for us, we need to be able to differentiate ourselves by the quality of our people, by our technical expertise, by our passion for client service. Those things have to really matter, both to the people we’ve got, but also to the clients that we use. So we’re going to only look to play in areas where that makes sense.”
Globally the company expanded in 2015 with a loss adjusting office in Rome, an outpost in Montreal and Cape Town, with the latter opening earlier this year.
“Where we can see it’s a natural addition in a geographic sense, we’d look at it,” he added on future acquisitions.
“Where we can see it’s a natural addition in a geographic sense, we’d look at it,” he added on future acquisitions.
Profitability not a driver of outsourcing
Forecasts ahead for the general insurance market, as well as the European Court of Justice ruling on VAT for outsourced claims handling, could prompt downturns in the market.
However, this is not something Marock is concerned about. “You don’t come to us for high volume outsourcing type arrangements. You come to us because you want technical expertise, because it’s important how it gets done,” he said.
“So I’m not implying it’s insignificant, but it’s going to matter more if the person made that decision on a pure price basis.”
