Novidea's Kershaw: Tech Integration Driving 2025 M&A Success

With growing consolidation across the insurance landscape, technology capabilities have become a critical factor in M&A decision-making. 

We caught up with Paul Kershaw, UK Enterprise Sales Manager at Novidea, to understand how technology is shaping acquisition strategies, why MGAs are becoming more attractive targets, and what makes insurance businesses more valuable in today's market.

Paul, what trends are you seeing in insurance M&A as we move further into 2025?

After the various acquisitions in 2024, which saw multi-billion deals across both the broker and carrier space, there is mounting pressure on many major insurers to maintain profitability forcing them to broaden their distribution channels. 

Carriers can either explore opportunities in existing lines via product development or by seeking expansion in the specialty lines sector. This will mean 2025 will be another year where the rise of MGA acquisitions becomes the talking point across all insurance markets.

Why are MGAs particularly attractive acquisition targets right now?

MGAs allow insurers to diversify their portfolios while keeping a tight control on underwriting discipline. 

They allow the carrier to take advantage of the market conditions and potential emerging markets such as cybersecurity, and the ever-changing risks generated by climate change, from EV in motor, to parametric modelling in P&C lines. 

However, even those insurers with deep pockets, especially from the gains made post-Covid giving an added firepower, widening their reach into specialty lines can take them out of their comfort zone and so it is easier to be more prudent and to acquire the expertise rather than spend years developing it internally.

How are brokers responding to these market dynamics?

Brokers are also facing similar challenges. While primary and reinsurance companies continue to acquire insurtech firms to accelerate digital transformation, brokers are also consolidating to enhance their digital capabilities and market reach. 

Falling interest rates might stimulate those debt-laden brokers to re-finance and release funds for a slew of M&As, not just in the UK, but also across Continental Europe which has become a feverish hunting ground in the past few years. 

Larger brokers are often seeking smaller brokers usually because the smaller operation's tech can be subsumed easily into the bigger organisation, and their tech is superior to those acquired.

What role does technology play in making these acquisitions successful?

When discussing investment with large players in the market, the concept of 'end-to-end' systemic change within the business can be a scary prospect. 

However there are competitive advantages when introducing data-driven insurance management platforms. Digitalising the front, middle and back offices into one seamless ecosystem gives the business real time access to data. 

This is where true efficiencies within the business start to accelerate growth and productivity. Often where the most urgent gaps are identified, a modular, phased approach can be used to assist the full implementation of a new digital infrastructure. 

A hybrid approach is becoming popular but making sure the system is bespoke and fully integrated does give companies the edge.

From your experience on the acquisition side, what should companies be looking for when considering potential targets?

Having spent many years in my career on the side of the acquirer, synergy is one of the most important things to look for when merging companies. 

The potential for increased profitability and market strength is achieved by not only leveraging combined resources such as IT, marketing, and HR, but by a synergy of technologies. 

A business that has enjoyed technology investment for growth means the purchaser doesn't inherit a large tech debt, making them more attractive and efficient.

How does technology impact the valuation of a business in today's market?

For the acquirer, what is needed is a better understanding of the overall value of the business you are purchasing. 

Smaller brokers with quality systems and tech, when acquired, are far better at business reporting and are more transparent, making them a reliable partner.

The London Market is going through significant transformation with Blueprint Two. How does this affect M&A strategies?

In the London Market this year, there will continue to be an urgent need to plug the talent shortage within the profession. Lloyd's Blueprint Two project has bold ambitions to standardise data exchanges with digitised solutions. 

This needs new thinking and as market observers have said, the insurance interconnectivity and vendor collaboration within the London Market has made the 'build vs buy' dilemma more pertinent among stakeholders. 

One way to attract the next generation, but also to strengthen a company's chances to realise its potential in a future sale, is through acquiring the technical knowledge as well as the platforms - this allows an embedded approach to any technological advancements in the business. 

Training and educating the superstar innovators is one part but retaining them and understanding that they are a core asset in any assessment by a prospective buyer is key.

What advice would you give to insurance businesses navigating the M&A landscape in 2025?

Creating this mindset of innovation is where insurtech and vendors need to educate potential acquirers on the 'art of the possible' with technology solutions helping them make informed decisions. 

Companies must assess whether an acquisition provides them with a unique competitive advantage that cannot be replicated internally. The 'build or buy' ethos will remain a challenge in 2025. 

The best advice is to pick a trusted partner and future-proof any growth strategy with the right people and expertise. 

As consolidation accelerates, companies that can take strategic decisions but also pivot with the ever-changing risk landscape will emerge the most profitable and sustainable.

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