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Sunday, Apr 21, 2024

Market Gains

The recent acquisition of longtime San Diego insurance brokerage Barney & Barney LLC by Marsh & McLennan Agency LLC is part of an industry trend, as large insurers increase their outreach by taking over regional companies.

In times of low interest rates, when investment income is down, insurance companies often achieve growth by acquiring smaller firms. In the case of Barney & Barney, both the buyer and the acquired company will benefit, Barney & Barney CEO Paul Hering said.

“The only change we are looking for is positive change,” he said. “The first thing to make clear is this was not a move designed with any interest in consolidation. This was a move that gives us an opportunity to expand our capabilities and expand what we are responsible for. It means a great growth opportunity for us. All of our people retain their positions.”

Going on the Road

Founded in 1909, Barney & Barney has annual revenue of $100 million and 500 employees. Hering said the acquisition will enable Barney & Barney to take its insurance services to new markets.

“We have an opportunity to take what was a state operation into new states that surround California,” he said. “We are looking forward to taking Barney & Barney on the road.”

Based in New York, Marsh & McLennan Agency, a subsidiary of Marsh & McLennan Companies Inc., was established in 2008. It focuses on serving midsize businesses. On Feb. 11, the parent company reported net income of $303 million in the fourth quarter.

Brian Cohen, president and CEO of Pacific Specialty Insurance Co. in Anaheim and Menlo Park, is a former chief marketing officer for Farmers Insurance Group. He said Marsh & McLennan is striving to grow in the West. By buying Barney & Barney, it acquired “a top-notch” regional player, he said.

For insurance companies looking to expand, acquisitions are more profitable than hiring your own team and opening new offices, Cohen said.

“That is called organic growth, but that takes a lot of time and money,” he said. “It is very common for brokerages to be acquisitive. That is really the fastest way you can grow.”

One of the reasons for recent insurance company mergers nationally is the broad perception that the worst of the recession is over, Cohen said. “When does a seller want to sell? When they’ve done really well. When they look really good.”

Another Recent Acquisition

In October 2013, Arthur J. Gallagher & Co. acquired San Diego’s G. S. Levine Insurance Services Inc. Terms of the transaction were not disclosed. Established in 1987, G. S. Levine is a retail insurance broker providing employee benefits, property and casualty insurance, and risk management services.

James McFarlane, chairman of the Western region for Arthur J. Gallagher, said such acquisitions make sense when entering a new marketplace. The buyer gets “a team of people who are well-regarded in the community, as well as established clientele.”

If all goes as planned, the acquisition may not even be noticed by existing clients.

“We work very hard to integrate our new partner into the Gallagher organization,” he explained. “Oftentimes when people look to sell or join forces, we have a tremendous amount of resources that will benefit their clientele through the additional relationships and additional expertise we can bring to the table, to help solve client problems and lower their insurance costs.”

Amy Bach, executive director of the United Policyholders insurance consumers group, says acquisitions and mergers often are ignored by consumers, unless there are problems.

“Most people when they buy insurance are influenced by advertising and reputation,” she said. “The name doesn’t matter.”

Eric Leavitt, CEO of the Leavitt Group, one of the largest independently held insurance brokerages in the U.S., said acquiring Barney & Barney was a great investment for the Marsh


“Insurance brokerages have been targets for a lot of venture capital and private equity firms, because of the sustainability of their cash flow,” he said. “The relationships insurance brokers have with their clients are generally long-term. People don’t move their insurance that often because it is costly to do that.

“Very rarely to do find a brokerage that is a bust,” he continued. “They are just solid investments. Barney & Barney is a great brokerage and it is a real win for Marsh to pick them up.”

One of the challenges of acquiring a company is to smoothly merge its corporate culture with your own, said Cohen. The employees of the acquired business need to be made to feel they are a part of the new team.

“You need to have a good understanding of what you are going to do to make sure you properly integrate the acquired organization,” Cohen said. “That isn’t just about what computer systems you use. It’s about the culture of the organization.”


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