Could the CMA fire the starting gun to unlock M&A in 2024?

It appears that everyone is up for grabs. In the past few months, M&A appears to have gone wild.

To name a few confirmed deals, Direct Line sold its commercial book to RSA, Swinton bought RSA’s brokered PL book, then Admiral bought the rest of RSA’s personal lines business, Allianz sold Premierline, and Markerstudy and Ardonagh’s Atlanta Group announced a merger.

Then, coming into 2024, there have been the recent bids from Ageas to buy Direct Line Group. The consequence of this potential deal means there would be one less player in the personal lines market.

Aside from this, there have been other market exits, such as Zurich pulling out of personal lines broker last year.

And that doesn’t even take into account the rumours we are hearing in the market.

First Central is said to be on the lookout for a buyer, Covéa has been on the market more than once over the past few years, with Aviva apparently looking to buy. Even Aviva itself has been rumoured to be a target for the likes of Generali, RSA’s parent owner Intact, and Allianz.

All of this could mean that, particularly in the personal lines space, there is less choice for both brokers and customers.

Despite all of this, Chris Cowley, who, as a partner at Taylor Wessing, specialises in acquisitions and disposals, said 2023 was a “less than vintage year” but that things look like they could pick up in the latter part of 2024.

“There are signs that sales processes are much more robust,” he said. “Probably in the second half of the year [2024], whether that translates into greater deal volume and deal value, it remains to be seen, but I get the sense that there’s a much better chance that happens this year than last year.”

Cowley says the moves carriers have made to “tidy themselves up” and focus on a particular line is also likely to continue this year.

“I do think that that process of disposal of non-core businesses will continue and the carrier market will continue to tidy itself up, and possibly that would be through larger corporate acquisitions.”

Lack of choice

All of this could mean that, particularly in the personal lines space, there is less choice for both brokers and customers.

Highlighted by a recent article in sister publication Insurance Age, Stuart Reid, chair of Partners& said: “The number of players is reducing dramatically. It is a step change in that part of the industry. There are concerns that there is [increasingly] becoming a lack of choice.”

Meanwhile, Liz Bilney, former head of Somerset Bridge, said: “It feels like [with] the bigger players, all their strategies are acquisitive, and everyone is looking for the next acquisition. 

“From a brokers’ perspective you do wonder how many big players will be left.”

It is a genuine concern. It was enough for the British Insurance Brokers’ Association to dedicate a full page spread of its manifesto to the effects these market moves has had on PL brokers.

While many insurers still in the PL market have said they would continue to support brokers, if there are fewer players for brokers to choose from, there is still a diminishing environment.

Markerstudy/Atlanta merger

Maybe this is what the CMA has been looking at in the Markerstudy/Atlanta merger.

When the CMA announced the investigation into the merger on 30 January, it said it was looking to see if the union would lead to a lessening of competition within the market.

The CMA’s statement said: “The CMA is considering whether it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”

Cowley said that, from a legal standpoint, he was interested to see the conclusion of the CMA’s investigation.

“The area of regulation that is going to be a particular interest in M&A is what the CMA is going to do about further consolidation in the UK market. How the Atlanta/Markerstudy transaction plays out will be of a lot of interest to market participants this year.”

Sources have said that the fact the deal was being looked at in the first place had “spooked” the market, and quite rightly so.

The deal could set a precedent for any future deals of a similar size. 

If the CMA allows this deal to go through, then surely it has to let others go through as well, such as the Ageas/DLG bid, should the latter accept an offer from the former.

Then on the other hand, if the CMA decides to send the investigation to phase two, others in the market could take a step back and consider their acquisition targets.

And if the CMA blocks the merger, others in the market will definitely rethink their acquisition targets.

But if the CMA greenlights it, could that prove to be a starter gun for a bumper 2024 for acquisitions?

The CMA’s deadline to provide a decision on phase one is next week, on 26 March.