by Chiamaka Ajeamo
Despite economic challenges due to the pandemic, it is expected that global insurance/reinsurance mergers and acquisitions (M&A) activity will be on the increase this year, analysts at law firm Clyde & Co have stated.
According to a recent report by the law firm, the insurance sector completed 407 mergers and acquisitions deals worldwide in 2020, while it recorded 419 in 2019.
An analysis of the data revealed that America remained the most active region for M&A last year, with 192 deals in 2020, up by 6 per cent when compared to that obtained in 2019. Also, deals in Asia Pacific grew by 9 per cent to a total of 75, but the Middle East and Africa saw the biggest percentage gains, up by 167 per cent to 32 completed deals. In contrast, activity in Europe was down by almost a third (34 per cent) year-on-year, to 103 from 155 in 2019.
Reacting to this development, the Head of Clyde & Co’s European Corporate Insurance Group, Ivor Edwards, said “Insurance transaction activity worldwide belied expectations in 2020. Deal-makers in the insurance industry, like many others, paused for reflection in the first half of the year, but not for long.
“Strategic players in the market and M&A specialists clearly did not want to be relegated to the sidelines and quickly regrouped to identify and pursue opportunities. Given that remote working does not easily lend itself to negotiations, due diligence and all the other elements that make up a transaction, the speed with which companies adapted to the new environment was impressive.
“With deal announcements continuing swiftly, we expect the level of completed M&A in the coming months to accelerate as re/insurance businesses trace opportunities to build scale, generate efficiencies and reach new customers in new markets.
“Given the volume of deals announced in recent months, Clyde & Co predicts that insurance M&A will surge in the first half of 2021. The number of completed deals worldwide is likely to surpass 220 in a six-month period for the first time since 2019 and could go even higher in the second half of the year, analysts believe.
“Deal-makers’ appetites have returned, buoyed by growing confidence in the economic outlook and the sense that there are opportunities.
“Despite market hardening, many of the fundamentals driving M&A will persist. These include competition for assets, the need to diversify portfolios, add digital capabilities, and increase scale and market share. The availability of plentiful capital, combined with a deeper pool of targets, will give buyers plenty of choices although we expect them to select acquisitions carefully to ensure the best fit with their strategic objectives,” Edwards concluded.