The national acquirer

Manchester consolidator Community Broking Group was formed in 2000 - by founding directors Martin Lewis and Mike Askew - with the aim of becoming the dominant commercial brokerage in the area.

Backed by venture capitalists Texas Group Holdings, CBG first acquired BCH Insurance Brokers, followed by the acquisitions of John Booth & Company, Springhead Insurance Services, Lux & Co and Gerald Huxley & Company.

CBG listed on the Alternative Investment Market in November 2003, raising £800,000. This year, CBG has already acquired Cloughley Insurance Services and MVA Healthcare. It is currently in advanced negotiations to acquire two Manchester-based brokers and is looking at further acquisition opportunities.

David Worsley, former group finance director of Texas Group Holdings, joined CBG as chairman in order to devote more time to the venture. Texas currently holds a 15% stake in CBG. He says: "Texas are a different type of VC company and are not after a quick turnaround but are looking to build value in the long term."

In addition to VC funding, Worsley says AIM has enabled the group to fund its aggressive acquisition plans. He says: "The cheapest cash you can get is shareholder cash. It is much better to go to shareholders for cash than borrowing, which causes all kinds of problems with regulation as there are certain solvency tests that must be met."

Hermes Pensions Management recently acquired a total of 14.9% stake in CBG. Worsley says: "This reveals a positive view on the company as an investment going forward. Pension funds invest for the long term because they believe in the growth of the business and the ability of the management to deliver."

CBG's co-founder and managing director, Martin Lewis, held a number of management positions at independent brokers before setting up CBG. Rather than remain in management, he was determined to set up his own firm - providing a personalised client service from motivated employees that participate in the ownership of the company.

CBG offers performance-related share options through its management incentive scheme, which is a real incentive to make the whole company perform well, according to Lewis. It also facilitates CBG's strategy of acquiring businesses where the owner/managers are looking to exit.

Lewis says: "Owner/managers typically have two loyalty factors that define their exit strategy - what will happen to their clients and their staff? Not only do we acquire successful commercial brokerages, we also acquire good staff. This in turn facilitates the retention of clients."

CBG's target market is small to medium-sized enterprises for which it aims to provide a one-stop shop. In addition to commercial covers, it offers associated personal lines and financial services. It has a series of divisions including an employee benefits division and a risk management team.

Lewis says: "We offer a personalised service and work with clients that value the broker/client relationship. SMEs tend to be run by people with an entrepreneurial mindset who are looking for the broadest offering from their advisers."

Risk management is key to its offering, according to Lewis. He says: "We want to create double benefit for the client as not only are they reducing or eliminating potential risk but, if you tie that in with the carriers requirements as well, this should produce some cost savings. We want to imbibe a culture that is risk-sharing rather than just risk transfer and pound swapping."

During the next 12 to 18 months, CBG will focus on achieving a critical mass in Manchester and is looking to hit £25m premium income by 2005.

It has already submitted its application to the Financial Services Authority and has a full-time compliance manager in place to ensure it is ready for regulation from 14 January 2005.

Lewis says: "We are concentrating on Manchester because, as an independent broker, we can not compete with the likes of Aon and Marsh nationally but we can compete with them in one market."

Lewis adds: "Once we have achieved this we will decide whether we want to replicate that model in other parts of the country and may look to acquire a Lloyd's broker, which would give us greater control of our business."

With VC and pension-fund backing, a listing on AIM and six acquisitions under its belt, CBG is well placed to achieve its goal of becoming a top commercial brokerage in Manchester.

COMMUNITY BROKING GROUP

Chairman - David Worsley

Managing director - Martin Lewis

Established - 2000

Number of offices - two

Locations - Manchester

Number of staff - 40

Lines of business - Commercial lines, personal lines, financial services

Gross premium income - £18m.