Are there high stakes for AR networks following Aub and Movo Group deal?

At first glance, the announcement in August 2024 that Australian-based broking group Aub had agreed to buy an 80% stake in UK-based Movo Group may have seemed an unremarkable continuation of the recent trend for large overseas consolidators to gobble up UK commercial brokerages.

According to MarshBerry’s March 2024 Insurance Distribution Market Report – UK 2023 M&A and Market Structure Annual Review, overseas buyers accounted for 33% of UK M&A deals in 2023 – compared to only 8% in 2020.

But Movo Group is more than just an equity broking group. It also owns a leading appointed representative (AR) network, called Movo Partnership, as well as the Durell Software insurance technology platform.

Furthermore, the vast majority of foreign acquisitors have so far been from the US. There is no pattern of involvement from Australia or any other country.

Looking at the M&A relationship between the UK and Australia, Aub had already acquired Lloyd’s broker Tysers in 2022 and agreed to take a 40% stake in AR network Momentum Broker Solutions in June 2024.

The only other significant Australian M&A activity had been from PSC Insurance Group before it announced its sale to The Ardonagh Group in May 2024 – this included, for example, its purchase of London-based broker Turner Rawlinson in July 2023.

Partial stakes

Unlike most consolidators, Aub tends to buy stakes in companies as opposed to purchasing entire organisations.

Olly Laughton-Scott, managing director at MarshBerry UK, told Insurance Times: “Aub has a very distinct and unusual acquisition model where it doesn’t have to acquire 100% stakes. [This] comes from the structure it operates in Australia.”

The fact that Movo Group has also taken this same rare approach to its own acquisitions – of which it has made 18 during the last four years – suggests that references from both parties about having closely aligned business models should not be dismissed as PR fluff.

Lea Cheesbrough, chief executive at Movo Partnership, said: “We intend to continue making acquisitions and only taking a stake makes sure we don’t quash the dynamics of the firm being acquired and can still give its owners autonomy.

“Aub is similarly focused on owner-operators focusing on local communities and acquiring partial stakes is all part of this. Local brokers know their local territory and that’s something we have to retain.”

Importantly, Movo Group highlighted that keeping a minority stake should help it to maintain some quirky approaches.

Unusual features

An AR is an organisation that has a contractual agreement with a principal firm, which enables it to provide financial services products on behalf of the principal.

Principals, which have overall responsibility for their ARs’ activities, will often work with a number of AR businesses.

Movo Partnership has several unusual features for an AR network. It doesn’t charge commission – only a flat fee – and its brokers are able to deal directly with insurers. Brokers can also have their claims handled via their network’s in-house team.

Additionally, Movo is notable for backing broker startups – which account for nearly half of its 100 plus network members.

Cheesbrough continued: “The Aub deal allows us to invest more quickly, giving us more cash to back more startups, so it’s good for the industry.

“About 10 years ago, there were around 7,000 independent regional brokers in the UK but now there’s only around 2,300.

“I’d like to add at least another thousand [to that number] and startups are a good way to do so. The other way is preventing traditional M&A activity sucking up brokers and stacking them in a central hub.”

AR network issue

Aub maintained that all the different component parts of Movo Group are of equal interest, highlighting that the Movo business model has many parallels to its own in Australia and New Zealand – where it has invested in broking networks, individual broking businesses, MGAs and insurtechs.

However, Aub has demonstrated a clear interest in AR networks specifically following its investment in Momentum Broker Solutions and Movo Group.

As these two major players now share a common parent, there is a risk that the important ability of networks to offer their own distinguishing features could reduce.

John Dunn, managing director at Brokerbility, said: “Movo is one of the key players within the AR space and AR networks are assuming greater importance as cost issues now make it highly unlikely that new broker businesses would start as regulated entities.

“But as Aub has also invested in Momentum, which is another important AR player, it could possibly curb competition within the market.

“Competition is good as it increases professionalism and breadth of offering, but you would think there has to be a strategic fit in Aub acquiring stakes in two players in the same space.

“It will be interesting to see over time if their propositions come closer together.”

Aub pointed out that it is invested and involved with five different broking networks in Australia and New Zealand and that some of these operate with each other in a ‘co-opetition’ model – cooperating with a competitor to achieve a common goal or to get ahead.

Mike Emmett, chief executive and managing director at Aub Group, noted: “We are sensitive to what makes each of these networks valuable and work with each of them to ensure they benefit from Aub Group resources [while] also focusing on differentiating their strengths.

“We believe this approach has made these networks some of the best examples of broking networks in the region and possibly the world, even though we are the common shareholder.”

The jury is out

Should this deal between Aub Group and Movo Group receive regulatory clearance, the UK insurance broking community stands to benefit from new overseas capital and, more specifically, from increased startup opportunities and a focus on local communities.

Both Aub and Movo certainly share similar values and goals, but vague statements of intent at the outset of a transaction are not always matched by what happens further down the line.

Perhaps ominously, Aub did not wish to comment directly about Momentum Broker Solutions – only time will tell whether the two AR networks will eventually experience reduced competition.