More than 60 percent of insurers say that their most recent merger accomplished the desired objective of competitive position strengthening— double the success rate reported by non-insurers involved in mergers.
While strengthening competitive position is mentioned most frequently as a business reason for mergers and acquisitions (M&As) across all industries, U.S. insurers believe that they are more successful at accomplishing that goal compared to their non-insurance counterparts, according to findings from global professional services company Towers Watson’s recent M&A Role of the Manager survey.
Sixty six (66) percent non-insurers and 60 percent of insurers cited strengthening competitive position as an objective for their most recent M&A, 62 percent of insurer respondents said the transaction was highly successful in this regard, while only 31 percent of non-insurers responded in kind.
Additionally, cost structure optimization was the third most common reason given by insurers for the transaction (31 percent), while non-insurers mentioned this far less frequently (17 percent).
The survey also found that mergers are more common outside the insurance industry (22 percent compared to 7 percent for insurance). However, acquisitions themselves are roughly comparable (80 percent for non-insurers versus 83 percent for insurers).
The survey involved more than 203 managers in U.S. organizations, 100 of whom are from the insurance industry.
“In most instances, especially in the insurance industry, when it comes to M&As, one company’s loss is indeed another company’s gain,” said Jack Gibson, Towers Watson’s managing director for Global Mergers and Acquisitions. “Another insurance company that might be devoted to the business line that is being sold could make the acquisition and strengthen its focus and industry position. In turn, the larger financial entity can use the revenues from the divestiture to invest in its more streamlined business ⎯ basically a win-win for both companies.”
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