The driving factor behind Navacord’s mergers
Fresh from completing three mergers this month, Navacord president and CEO Shawn DeSantis tells Canadian Underwriter the company is working to expand its geographic presence and build national scale.
In British Columbia, Navacord announced its latest deal with Harbord Insurance earlier this month. The brokerage has joined Waypoint Insurance, a Navacord brokerage based on Vancouver Island.
Then, Navacord announced that Waypoint would absorb Allwest Insurance under the Waypoint banner, effective Nov. 1. These two mergers strengthen Waypoint’s presence in B.C., DeSantis explained.
In Saskatchewan, Henderson Insurance, Hoffmann Kool Insurance and Life Line Brokers are combining as HK Henderson. Effective Nov. 1, this merger will create one of the largest commercial brokerages in Saskatchewan, and, in turn, a strong value proposition for clients.
“Our bench strengthen in Saskatchewan is much stronger than it was when those two businesses were independent,” DeSantis said.
“Bringing these businesses together will allow us to really up our game in those geographic areas, bring a stronger value proposition to the marketplace, and allow us to go and get market share.”
Under its decentralized M&A model, there are three traits Navacord looks for in potential deals: specialty offerings, prime geographic location, and good leadership.
“We’re trying to build the Great Canadian brokerage, and to do that, you need to have a local presence in all areas of Canada,” DeSantis said. “For us, it’s about geographic expansion, and it’s also about making sure we have the right size and scale to bring the best value proposition we can to our clients and to our colleagues.”
As to whether Navacord has more mergers in the pipeline, DeSantis shared the company sees opportunities in Western Canada, particularly in Alberta, and Ontario.
With higher capital costs, dealmaking hasn’t slowed, yet buyers are judicious about where, when and with whom they’re making deals.
“We’re looking for variables that would drive strong organic growth. That helps with the cost of capital when we know the business can continue to grow organically at a strong rate,” DeSantis explained.
The other factor Navacord looks at is whether combining two brokerages could have cost-saving effects in the long run.
“Could they join one of our other partners? Could they be part of a bigger brokerage in that geographic area? Potentially there are cost savings and strong organic growth coming out of that,” he said.
Merging two or more brokerages together also allows the new entity to strengthen its succession plan.
Perhaps a sound move as 8.5% of the workforce is expected to retire in the next five years, per the Insurance Institute’s Demographic Report.
“You end up building a stronger executive team focused on working together, so if one of them happens to retire or leave the business, you now have a group of executives that can fill in support,” DeSantis shared.
Feature image by iStock.com/zakokor
