Are you an MGA thinking merger?

Winding cords

At the beginning of the pandemic, experts were lukewarm about insurance mergers and acquisitions(M&A). The prediction was for a depressed marketplace to coincide with the languishing economy. These predictions, however, did not come true, and acquisitions flourished in contrast to the bleak forecast from early 2020.

Carriers have been especially bullish about acquiring MGAs because they offer what companies are looking to add: a deep reach into niche markets, an extensive distribution capacity, a focused knowledge of specialized risk, and an outsized market performance in the last ten years. In the ever-expanding insurance marketplace, MGAs have only become more interesting.

Adrian Leonard from AM Best Review writes: “MGAs can provide carriers with instant infrastructure, including well-managed risk and governance structures, intellectual property in underwriting pricing, and access to underwriting talent” While this is true, all MGAs may not be equally as attractive to acquisition.

MGAs using purpose-built, cutting-edge technology designed for their unique business practices are most attractive in the acquisition marketplace. It’s not always the book of business that is most attractive, because MGAs with modern tech are working more efficiently, reaching clients more effectively, and creating systems that can easily be assimilated and consolidated.

Better technology creates opportunity

Tech solutions designed for MGAs have changed the game. The adoption of MGA-specific platforms has been transformative, as it has allowed them to prosper in their niche space between agencies and carriers. Those that have leveraged the best technology for a better bottom line are more attractive to the companies on the lookout for prime acquisition opportunities.

Additionally, MGAs that use technology designed for their unique needs are more likely to have a deeper reach into the market and a stronger hold on clients. As the sheer volume of MGAs expands, it will become more difficult for individual companies to be noticed. Those that are reaching more clients and creating more opportunities in this extremely competitive market are far more likely to be noticed and approached for acquisition. Technology designed for MGAs makes this happen.

Better technology creates data synergy

For MGAs courting acquisition, maintaining an infrastructure with modern technology can make or break the deal. Post-acquisition consolidation of information and systems is an expensive undertaking and can be an enormous pinch point. Data that can readily be consolidated and incorporated into an acquirer’s systems creates an ideal situation where the strain of information transfer can be reduced.

On a recent webinar, Ryan Bosworth, Vertafore Director of Sales for Carriers and MGAs, discussed MGA acquisition and the benefits of aligned technologies. “Conversion is the biggest pain when it comes to converting data from one system to another. If you have two systems that are the same, then that challenge is a little easier.” Bosworth’s ideas about technology align the attitudes of experts throughout the acquisition and InsurTech industry: working with modern, industry-standard technology creates opportunity for smoother transition of data. And a better transition equals increased opportunity for acquisition.