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SPECIAL FEATURE - M&A
M&A successes: About half of respondents believe to make at least one acquisition in the next three years. With
their transaction achieved its strategic objectives; only a third of firms planning to make divestments, the market
less so for talent objectives. for quality targets is already becoming more competitive, with
From the same study, we discovered that high-retention resulting knock-on effects on valuations.
companies (those retaining 60% or more of their staff post-
deal) are more likely to rate their strategic objectives successful When combined with many firms’ continued focus on top-
(88%) than low-retention companies (67%). line growth, an increase in valuations could lead to future
challenges for those firms that fail to consider the full economic
Whilst retention is a key element of success for all implications of any deal. This is particularly true in North
transactions, it is particularly important for insurance America and Developing Asia, where competition for assets
companies in the context of cross-border deals, where the looks likely to be particularly fierce.
availability of specific key talent (underwriting expertise
among a limited number of individuals in the market, for Results from our survey suggest that most firms remain
example) may be scarce. focused on their own region when considering acquisitions
and only a minority are prioritising expansion further afield.
Our research shows that insurance companies that are either However, many of the firms based in emerging markets
embarking on or considering a M&A transaction are advised express an openness to considering joint ventures and this
to create a talent retention plan based upon best practices could potentially be a route to entry to emerging markets for
and incorporate this into their M&A playbook. Retention firms that are currently cautious about exploring these high
agreements are an important part of that plan but should be growth markets.
complemented by other actions such as personal outreach
by leaders and managers, strategic promotions and employee Whilst a smaller proportion of companies are planning on
participation on task forces. divestments, we expect that management teams will more
clearly identify their core, strategically important markets,
For those companies considering cross-border or emerging- and look to withdraw from those that are not. Arguably, the
market transactions, a culture and compensation philosophy recent sale by Ageas of its Hong Kong insurance unit, having
that is global but allows for regional and local variations can just established a joint venture partnership with Security
make key employees feel comfortable and valued in their new Bank of the Philippines, is an example of just such a strategy
environment. in practice. Another example, is Standard Life’s decision
to close its Singapore office whilst agreeing to increase
Ultimately, there are no hard and fast rules for talent its stake in its Indian joint venture, HDFC Standard Life
retention because of the specificity of individual transactions, Insurance.
the distinct cultures of the insurance companies involved in the
deal, and the differences in mission and strategy motivating the If demand for acquisitions continues into 2016, as we expect
M&A activity. But, the general concepts outlined briefly above it will, and if profitability continues to come under pressure for
offer broad guidance that we believe is worth incorporating the reasons outlined at the start of this article, there is a risk that
into M&A planning. acquisition prices will increasingly appear disconnected from
M&A to continue apace? the reality of a tough market environment. This adds to the
From our most recent M&A survey, performed in conjunction already significant execution and integration risks associated
with Mergermarket, insurance executives expect the M&A with mergers.
market to remain active, with four out of five firms planning
Ensuring you have key talent in place, will become even
more important to (your continued) success.
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