Clyde & Co: technology driving M&A

Pieces of the puzzle.

Mergers and acquisitons (M&A) in the global insurance sector grew by nine per cent last year; an increase largely driven by new technology, suggests a new report from Clyde & Co. Global insurers are reportedly focusing on M&A as a way to broaden their access to innovation and an enhanced customer base, and reap the benefits of greater scale.

According to Clyde & Co’s report, insurers completed 382 M&A deals in 2018, up from 350 in 2017. Companies are snapping up new technological solutions wherever they can, in the hope that this will drive increased market share and deliver more efficient and effective underwriting services to customers new and old.

However, the picture wasn’t consistent in all regions – the Americas, Europe and the Asia-Pacific all saw M&A activity rising, but the Middle East and Africa saw a drop in the number of deals being done.

Technology, explains Clyde & Co, is a ‘skeleton key’ that can be used to unlock multiple doors to new processes and customers: “Companies with the deepest customer insights will become increasingly dominant and M&A immediately delivers the acquirer a vastly expanded pool of data.”

The report predicts, however, that broader M&A activity is likely to slow down over the first few months of 2019. This is due to a confluence of various factors: lack of momentum in emerging and developing economies, the looming threat of Brexit, trade wars and increased protectionism are all ‘casting long shadows’. The second half of the year could potentially see a pick-up, as there will be at least some clarity around Brexit and any resulting disruption will also create opportunities.

“Transaction activity worldwide was buoyant in 2018,” said Andrew Holderness, Global Head of Clyde & Co's Corporate Insurance Group. “Against a backdrop of stiff competition on pricing, stock market volatility and persistently low interest rates, a merger or acquisition remains a key strategy to reach new customers and markets, and drive down costs by delivering synergies. However, factors including Brexit, trade wars and protectionism are generating uncertainty, the enemy of deal-making. The slowdown in the Americas in the second half of last year is indicative of heightened investor caution and we predict 2019 will be a year of two halves – a slowdown in M&A in some markets in the first six months, while the second half should see a return to form.”