In an exclusive interview with this publication following the announcement of the deal in late December, CEO Nick Cook laid out his plans for the London and international broking business as it enters its next phase of growth.
Cook set out detail on the company’s strategy including:
Growth
Cook said BMS plans to triple its revenue in the next four to five years.
“If you look at the historical performance, that is eminently achievable because that is what we’ve done when you look in the rear-view mirror,” Cook pointed out.
BMS has expanded rapidly since it secured investment from British Columbia Investment (BCI) and Preservation Capital Partners (PCP) in a 2019 transaction which valued the business at £500mn.
Its December deal, bringing Eurazeo alongside BCI and PCP, valued the company at £1.75bn.
In order to continue that rate of expansion, Cook said BMS will focus on its three core activities – international, specialty and reinsurance – with extensive hiring to continue.
For 2023, the business has budgeted for 149 new hires, Cook said, building on its post-2019 strategy of expansive recruitment
Core strategy
Cook stressed that bringing Eurazeo into the fold will not radically change BMS’ plans.
“This isn’t a pivot where we’re going to do something vastly different; in fact, one of the attractions of the business model is the simplicity of the strategy,” he said.
“We’re got those three pillars – international, specialty and reinsurance – and we believe our ability to grow into those sectors is still significant and that is what [Eurazeo] have bought into.”
Cook said BMS’ advantage in London is its position as a specialty wholesaler without a retail network from which potential conflicts with clients’ interest can arise.
“All brokers are in that specialty space but they are not just in that specialty space, they do a myriad,” he noted.
“Because of the clarity of our strategy of not being a global retailer – not being in the US, being able to service any independent broker anywhere around the world because we don’t have channel conflict and keep that clarity – it allows us to really scale our opportunity in London,” Cook added.
“We think there is an opportunity to really dominate the specialty space in London. The last broker to do that was JLT.”
BMS’ relatively small size at present compared to JLT – which was a $400mn revenue business when it sold to Marsh McLennan in 2018 – provides plenty of headroom for growth, Cook explained.
“We want to make sure that when you think of BMS in London, you are thinking of a powerhouse of a true specialty broker.”
Cook emphasised that BMS has no plans to expand into retail insurance in the US, where its only activity is reinsurance.
“In the US we are a reinsurance broker and that is traditional reinsurance, capital advisory and facultative. We have no intention of being an insurance broker on the ground in the US – we’ll leave that for many of our competitors,” Cook said.
Over the course of BMS’ history, the company has developed from providing single solutions to US retailers to dealing in a plethora of business lines.
“We started 10 years ago being a property broker to, say, Alliant or whoever it may be. We’re now marine, cargo, construction, financial lines, energy,” Cook noted.
“You will see us doing more and more in that space.”
M&A
BMS has undertaken selective M&A, mainly overseas, but has shied away from the big-ticket London deals that have dominated the sector in the recent past.
Cook said BMS will keeping aiming to draw 10%-15% of its annual Ebitda through bolt-on acquisitions and that it will maintain its focus on international rather than domestic M&A.
Eurazeo’s connections throughout Continental Europe and Asia will assist in that international deal-making, Cook pointed out.
“In London, M&A is complicated; it has lots of cultural issues,” he said.
“There are clearly going to be some opportunities that come up that might be, on paper, quite complimentary, but you’ve got integration issues.”
The Eurazeo deal, however, does give BMS the option to bid in large-scale M&A if the conditions are suitable.
“What this deal does give us is the firepower to be a player in that process if we want to,” he noted. “Where we were probably not in a position to go for transformative M&A before, we can now.”
MGAs and capital advisory
A key difference for BMS post-deal will be a new focus on international MGA business, as well as the build-up of a capital advisory capability.
Cook said though that the company will take a highly specific strategy when considering MGAs, focusing on businesses which will complement its existing international presence, rather than those based in the UK or the US.
“We won’t do Pioneer,” Cook said, referring to the roughly £300mn MGA business with which it shared a stable under Minova ownership prior to the BCI/PCP deal.
Pioneer’s constituent parts were sold off in various transactions in 2019 and 2020, following a tumultuous period of underperformance.
“The lesson we learned is eating your own lunch in your backyard,” Cook said of the Pioneer experience, warning against “hiring underwriters from your client base” by running an MGA within the London market.
“You will see us strategically around the world using this recent investment to look at building our own MGAs or acquire MGAs,” Cook added.
“Where we have specialty retail – Australia, Spain or Canada – where it’s complimentary to what we are doing and it’s adding a service, and giving us a broader reach into distributing products, that could be quite interesting for us,” Cook continued.
“In Asia, for example, at the moment all we’re doing is transactional liability and a bit of financial lines, so could we build an MGA that complements what we’re doing there?”
BMS is also building up a capital advisory business, in a bid to tackle the “lack of choice” for such services, Cook said.
“As we grow our reinsurance business we want to offer that holistic approach,” Cook added.
“Being set up the way we are, all on one platform, we are completely agnostic as to what the solution is for clients: it could be a cat bond, it could be fundraise, it could be a binder.
“We are underweight in capital advisory and we’re going to build it in London, Bermuda and the US.”
This development will build on BMS’ recruitment of James Ferris and Chris Harding as directors of capital and risk advisory, based in Bermuda and London respectively.
The company has also recently hired Erik Manning, formerly head of ILS at Miller Bermuda.
Shareholder structure
In securing long-term investment from BCI and PCP, while bringing in a new investor in Eurazeo, BMS has achieved an ownership structure similar to that of Ardonagh and Howden, which avoids the cycle of sale after sale to successive majority owners.
“I don’t think I’d go as far as saying this is utopia, but it’s a very flexible structure,” Cook said.
“The advantages are obvious – you don’t have one pension fund or one private equity house that can drag you to a sale.
“A significant proportion of the company is owned by a pension fund and employees: private equity is a minority holder,” Cook explained.
“We’re not stuck in that cycle where every seven years people say, ‘you just know BMS is gearing up for a sale’.”
The deal has, however, created a liquidity event that has provided equity for employees.
“Each of those investors has a different timetable and the advantage of that is when one wants to exit you get a liquidity event, so you get liquidity for staff,” said Cook.
“BMS is a good example of the old model of a privately held business with somebody walking around with a share certificate that they’ve had for 42 years and then suddenly it’s worth something.”
The Eurazeo deal has also given BMS a “refuelled” equity base, allowing the creation of 200 more employee-shareholders.
“We’re up to 60% of the staff as shareholders now,” Cook noted. “The goal is 100%. I want everybody to be a shareholder – as complicated as that is. It’s achievable through new incentive plans that have been put in place through this deal.”
The ability to offer equity is a major advantage in the current hiring market, Cook pointed out.
“We have additional firepower to create incentive plans to hire talent, and that’s very important at the current time in the cycle,” he added.
“Other [brokers] are running quite tight, and that should be a big pull for us.”
As the company continues to grow, Cook said it is a strategic priority to maintain BMS’ culture.
“It very much is employee- and customer-first and as you get bigger, that’s the challenge,” he said.
“Look after your people and they in turn will look after their clients – it is that simple in a people business. Woe betide us if, over this period of growth, we don’t continue to remind ourselves of that and we end up smelling like Marsh and Aon or any of the other big global retailers.
“If we can hold that culture, we still become an employer of choice.”
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