The Mediators Congress being held in Gijón yesterday included a round table entitled "Mediation as a profitable investment", with the participation of Carles Alsina, CEO of Sabseg Group; José María Galilea, president of Grupo Galilea; Javier López Linares, executive president of Concentra, and Salvador Marín, CEO of Howden Iberia, moderated by Ventura Ruperti, partner of Ineo Corporate, who began by asking the participants how they see the mediation sector in 5 years.
Galilea stated that "the integration process is the result of the need for volume that we all have. To negotiate with companies we need volume. In a few years' time, groups with more than 100 million in commissions will clearly increase. We also have to take into account that agents no longer receive the same support from their companies and many will move to the brokerage world. Brokerage will move from transaction to advisory, which will be its future function.
For Alsina, "these are interesting years for mediation. The market is changing and it is an opportunity. The skateholders (regulators, clients, companies...) are becoming more and more demanding and that will set the future pace of the sector. I don't think that more operators will enter the purchasing market in Spain, perhaps just a few more, but integrations will continue, because small and medium-sized brokerage firms see their future threatened".
War for talent
For his part, Salvador Marín pointed out that "in our sector we have two risks: The first is the war for talent. The sector is not capable of attracting young talent and there is a problem with succession in brokerages. If we are not able to attract talent, we steal it from each other, which leads to salary inflation in brokerage. Secondly, regulation makes us spend a lot of time on compliance.
López Linares was much more optimistic: " There is room for everyone in the industry. A small brokerage can be more efficient than a large one. In our case, when we buy brokerages, what we are looking for is above all talent".
Integration problems
The speakers also gave their views on the problems encountered in integration processes. According to Alsina, "the first requirement is to understand well who you are incorporating into your project, that we have a common vision and values. We are very restrictive when it comes to incorporating brokerages and for the purchase to work, you always have to speak clearly. You incorporate people who may feel good or bad after the sale, and the buyer must manage to maintain the status quo".
Galilea was categorical: "It is not a money business, it is a people business. That is why we can integrate brokerages without the need for them to sell the company. The problem after the purchase is the next day and also whether or not to keep the broker's brand. Integrations take time; they are not done in a year.
Marín considered the experience in acquisitions to be very important: "There is a need for compatibility between the two. I don't think there is a single culture of integration; it is built little by little. It' s no longer the case that you have to come to the buyer by sweeping them off their feet. You have to treat people well, that's why our motto is 'People first'.
Linares agreed on the importance of experience, "which leads us to treat the person we have bought as a partner, not as an employee. In integrations, the most difficult thing is to manage egos.
For Alsina, "not all projects are the same. We have developed an integration tool to set the timetable and make it easier to understand how the process is going to be, thus reducing uncertainty".
How they rate brokerages
Finally, the subject of pre-purchase appraisal criteria was addressed.
According to Marín, "there are many criteria. Not everything comes down to a multiple of Ebitda. You also have to be creative when it comes to pay. There are many ways for the partner to make money. My experience is that you have to have 51% of the partnership you buy in order for it to work".
Galilea believes that "a multiple of Ebitda is a pipe dream. We have traditionally used twice the commissions plus 5 times the profit, divided by two. There are people who do not have good Ebitda but have a wonderful business.
Linares confirmed that " weonly buy things that we can improve".
And Alsina concluded: "Everyone likes to say that they have sold very dearly. Today, valuations are very high and I see little room for increase in the future, maybe they will go down a little bit".
Source: Insurance News
