Behind the scenes of an aggressive brokerage consolidator

Synex Business Performance plans to end this year with more than $1 billion in premium, a far cry from its humble beginnings of $3 million in premium just seven years ago.

Currently, the Quebec City-based holding company has about $800 million in premium, most of which came from transactions over the last couple years, said president and chief vision officer Yan Charbonneau.

“Synex is an aggressive consolidator in the P&C market and the [employee benefits] market,” he said, noting the company has done 15 transactions since February 2022. “We bought for more than $400 million of premium across Canada just this year, and $250 million last year.”

The company plans to close three more deals over the next six weeks.

And yet, Synex is still looking to ramp up its M&A activity, Charbonneau said. “Now that the interest rate has jumped, we might slow down a bit, but we were on track for a deal a week.”

Charbonneau spoke to Canadian Underwriter about his beginnings in insurance and the formation of Synex.

After leaving a job at Deloitte, he started in the insurance world in 2004 when he joined his father-in-law at a small life MGA on the southern border of Quebec City. At the time, there were 15 life insurance producers and only a few million dollars of P&C business.

“I came in as a life agent, selling life insurance policies, but rapidly found my way into business development,” he recalled. “I bought the agency in 2009 and [grew] it to 800 life agents between 2009 and 2015. We sold this part of the business last year.”

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In late 2015, the agency held $3 million in premium. Under the advice of some consultants, the agency decided to buy its first P&C firm, focused mainly on commercial lines. “This resulted in the acquisition of Deslauriers & Associates in late 2016, growing our premium volume from $3 million to $31 million,” Charbonneau said. “This was the starting point of our acquisition strategy.”

After buying many firms between 2017 and 2020, the agency ended 2020 at $125 million of premium, 95% from commercial lines. “2020 was mainly focused on creating a leadership team. Synex was created in 2020 to provide a common name to [the] group. Our executive team was now ready to go to the next level.”

Synex then made three “significant acquisitions” – Invessa Insurance in Montreal ($50 million, 70% of which was commercial P&C), Sharp Insurance in Alberta ($70 million, digital personal lines only) and GoToInsure in the Maritimes ($90 million, mixed personal and commercial lines). The holding company also secured a $120-million minority investment by BBH Capital Capitals, the private equity branch of U.S. bank Brown Brothers Harriman.

With that, it closed about a dozen acquisitions – ranging from mixed personal and commercial lines, mainly commercial and employee benefits firms, and even one MGA – over a three-month period.

How did Synex manage to close so many deals so fast?

“During COVID, as we were a young company, it was hard for us to borrow a significant, large amount of cash,” Charbonneau said. “Indeed, we had some deals in the pipeline.

“We went through a private equity process that lasted almost eight months,” he said, referring to the BBH investment. “During these eight months, we slowed down the deals and pushed them all through what was the last five months. So that’s why we closed so much.”

As for overall acquisition strategy, Synex looks for “actual independent brokerages because our model is to be 100% independent of any carriers,” Charbonneau said, adding that the average volume per brokerage is about $50 million in premiums. “We’re looking for more commercial-focused brokerages than anything else.”

Synex also looks carefully at the brokerage’s management team. “We want to make sure that the management is either actually strong or has the potential of being so.”

Synex is also looking at Ontario and British Columbia, two provinces where it is under-represented. Currently in Quebec, it specializes in construction, where half of the province’s commercial volume is from construction.

“Our focus is really to double the organic growth,” Charbonneau said. “We actually have been, for the last five years, achieving between 15% and 20% organic growth without the acquisition part, year-over-year, and sometimes higher.

“We have a talent team to do so. We’re really looking for who we can acquire that has a potential of growth on tap that we can help to do so by adding markets, [and] adding some expertise.”

Feature image by iStock.com/nespix