Growth by acquisition

Worthing-based Argyll Insurance Group was founded by chairman Kevin Young in 1991 with a staff of five, and saw a first-year gross written premium of £1m. The predominantly commercial-lines group is now a provisionally accredited Lloyd's broker employing over 60 staff in three Kent and Sussex locations, with a GWP of £20m and a dedicated financial services division.

Organic growth was extremely important in the early years but, although an original culture of high-quality service and innovation remains today, growth by acquisition has become as important in recent years. This, Young explains, has been fuelled by the race to achieve the critical mass necessary to thrive in a condensing marketplace: "Argyll has capitalised on the reduced number of insurers and impending state regulation that has prompted smaller brokers to seek an exit."

The key to the group's ability to take advantage of acquisition opportunities lies in good business controls and a competent management team, Young explains: "In order to be in a position to benefit from acquisition opportunities, brokers must be a business in the real sense. Too many try to operate with technical people multi-tasking. Argyll made a conscious effort six years ago to get the central management team right."

Samantha Mills was appointed as finance director, to ensure accurate forecasting, tight financial control and better credibility with bankers, insurers and clients. Following this, Rob Green was appointed as group marketing manager, Sarah Dando to group human resources, Dave Jackson to IT and Chris Gibson to general chief executive. The appointment of this team significantly added to Argyll's credibility, he says, enabling the group to make four acquisitions in the last three years; experience that he feels places Argyll in a strong position to make further takeovers.

"Operational methods have really been established and underlined through this process. For example, the finance director is comfortable with due diligence, and any borrowing requirements are looked at favourably, due to the professional presentations we can make to bankers. Group marketing deals with announcements, image and integration, and staff are given a professional induction programme by HR.

"We also have a common IT platform, with a fully integrated virtual private network, which makes for increased efficiency and allows enhanced communication both internally and externally. The chief executive does not handle any specific accounts: he manages the whole team, and relates with the market."

In light of the onset of regulation under the Financial Services Authority, Young says that brokers will need to demonstrate that they are credible, professional businesses first and traders second: "If we can do that, we will raise our profile so that we are seen as a profession, rather than an industry. If we do not, we will lose our status as independent intermediaries, and become nothing more than introducers to the massive carriers that have dominated since the merger and acquisition activity of the last decade."

While opportunist acquisitions form part of Argyll's focus, it is also keen to become a fully accredited Lloyd's broker as soon as possible and meet strict growth targets. Young explains that Argyll is also looking at recruiting individuals or teams rather than businesses to help the group meet targets. "One area we are particularly interested in is the London market," he says. "We believe that the recruitment of teams will fit extremely well with our growth and service objectives. We also know that there are a lot of good broking teams out there that have become disgruntled by the uncertainties forced upon them by the larger mergers and acquisitions. We do need specialists to achieve our objectives and, though our aim is to achieve full Lloyd's accreditation as soon as possible, we hope that this will be easier with a dedicated, professional London operation."

He concludes: "The days of negativity surrounding the London market are long gone. Being an independent provincial broker is great, but there can be no doubt that the traditions of our industry lie in the history of EC3."