Fiera continues expansion strategy with acquisition of Charlemagne Capital

Insurance executives worldwide may soon embark on a buying spree, setting off a “new wave” of mergers and acquisitions (M&A), fuelled partly by a move to align themselves with disruptive forces and a push to refocus their businesses, according to a new report from KPMG LLP.

Specifically, 84% of the 200 insurance executives surveyed across the globe plan to target one to three acquisitions in 2017, the report finds, with two-thirds, overall, eyeing cross-border opportunities as they seek broader diversification in the face of stalled global economic growth and heightened geopolitical risks across mature and emerging markets alike.

“While there are still many unknowns, we expect insurers to return to the market and start to take advantage of the new realities that have been created as we move into the second half of 2017,” says Ram Menon, global lead partner, insurance deal advisory, with KPMG U.S., in a statement.

Much of the thirst for expansion will be focused on the Asia-Pacific region, with 47% of survey participants marking it as their prime target. On a national level, the U.S. outranked the others, with nearly a quarter of those surveyed saying it was their top choice.

But acquisition for the sake of expedited growth in the short term, coupled with a reactive response to “immediate deal opportunities,” is an outdated approach that the industry has yet to fully shake, the report notes.

In fact, only 47% of participants with dedicated M&A teams, for example, think that their objectives for identifying deals are “highly aligned” with the overall corporate strategy.

A shift to a more strategic deal-making approach, the report says, should underpin insurance executives’ rationale if they want deals to pay off in the long run.

“They need to look beyond the traditional financial due diligence aspects of evaluating the deal to consider the true strategic fit and the potential risks associated with maximizing the value from any deal,” says Matthew Smith, of KPMG in the U.K., in a statement.

Still, there may be a lack of internal skills needed to properly evaluate whether there’s a good “strategic fit” when pursuing an acquisition, the report notes, as 61% of insurance executives surveyed rate their M&A team’s evaluation abilities as “high.”

On the venture capital (VC) front, the report notes that deal making in the insurance technology space surged by 42% in 2016, suggesting that “insurance VC funds want to be at the forefront” of innovation.

In fact, the report finds that about 62% of insurance executives say their firms either already have or plan to have an in-house VC arm focused on investing in non-insurance technologies.

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