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Potential merger would ’destroy the competition’ in insurance sector
Barlow Lyde & Gilbert (BLG) chief executive David Jabbari has refuted claims that the firm has been forced into a potential merger with insurance rival Clyde & Co (3 June 2011), despite sources claiming that the firm had no option but to agree to the deal.
While Jabbari said the discussions with Clydes proved his firm was “bold and innovative”, he stressed that at this stage the merger is not a done deal.
“BLG has a variety of options in pursuit of its strategy of growth in its core markets in the UK and internationally,” he said.
That said, a source close to the firm claimed that a weakened international presence and collapsing rates in the domestic insurance sector, particularly in the commoditised market, meant the firm was strategically “backed into a corner”.
The assertion is backed up by other senior ex-BLG partners, who said the firm’s management had told partners earlier this year that the firm would cease to exist as an independent entity by the end of the 2011-12 financial year.
One said: “My understanding is that the partners have been alerted that the firm needs a merger because it can’t regroup and rebuild.”
Outside perceptions are that any union would be a takeover by Clydes rather than a merger of equals. Financially there is a large disparity between the two firms’ profitability, with BLG’s average profit per equity partner (PEP) figure for 2010-11 estimated to be around £300,000, while Clydes’ figure for 2009-10 was £605,000. It is understood that this could result in a number of BLG’s equity partners being demoted to salaried status in any merged entity.
In turnover terms, however, the deal would be transformational in the insurance sector. Based on figures for 2010-11, the combination would result in a firm with a revenue of £306.5m, giving it a sporting chance of entering the UK top 10 and, as a BLG insider said, “destroying the competition”. Rival Holman Fenwick Willan posted a revenue of £112.5m in 2010-11, while Kennedys’ turnover for 2009-10 was £88.2m.
A partner at a rival firm said: “It’s a seismic move that will have consequences for all firms in the insurance market.”
The deal would give Clydes an instant domestic network, while BLG would gain access to Clydes’ network of 22 international offices.
In addition, Clydes would pick up BLG’s highly respected professional indemnity team, led by Sarah Clover, and the bulk insurance practice recently acquired from defunct firm Halliwells.