Original Article appeared in The Insurer on May 19, 2021:

Aquiline-backed Relation Insurance Services is looking to secure an MGA platform to build out underwriting capabilities around the specialty retail brokerages it has been acquiring over the last two years on a growth trajectory that has seen run-rate revenues pass $180mn, The Insurer can reveal.

The Walnut Creek, California-based broker consolidator is seeing an acceleration in its deal volume that began when Jeff Greenberg-led Aquiline bought into it back in 2019. It completed seven transactions in 2019, 10 in 2020 and has already done nine deals in the first four months of 2021.

Speaking to this publication, Relation’s executive vice president and head of M&A Tim Hall (pictured above) said the firm could have done 30 deals last year.

“We have the pipeline to do 80 this year, but we’ll probably do between 30-40 transactions in 2021,” he commented.

“We’re firing on all cylinders now after taking a couple of years to get the process going, the right people in place, getting in front of bankers and advisors and getting the story out there,” he said.

As previously reported, a big driver of recent deal activity has been the broker’s strategy of acquiring former Nationwide exclusive agents to add to its recently created business unit, Relation Select.

Relation picks up acquisition pace

But Hall said that those firms only account for around 25-30 percent of its active pipeline.

“The rest are in our existing business units, our new platforms, and we’re also looking at an MGA strategy,” he explained.

The executive said the MGA strategy had been part of the plan when Aquiline invested and would see Relation take some of the specialty businesses it has acquired and look to build underwriting capabilities around them.

“The preference is to focus on specialties that coincide with our existing specialties and our thesis is to acquire those capabilities because building them is really hard,” he commented.

Hall pointed to the attractiveness of acquiring an MGA writing small commercial programs and the potential to vertically integrate commission streams across underwriting and broker platforms.

The strategy bears some comparison with those launched by retail consolidators Hub International and Risk Strategies with their respective Specialty Program Group and One80 offshoots.

The executive said that Relation has looked at a number of potential acquisitions over the last two years.

“It’s a strategy we’re pursuing, and I’d love to have MGA capabilities internally within the next 12 months, then start to harvest some of our specialties, flow them through the MGA, and then develop new ones, adding teams and tuck-ins,” he commented.

Proprietary deals

Hall – a former Waller Helms partner and managing director brought in by Relation CEO Joe Tatum in 2019 – said the firm has a strong preference for proprietary deals, which account for around 80 percent of its current pipeline.

“We’ll always participate in a process but will remain disciplined. We try to sell the merits of partnering with Relation and we have a good story,” he said.

Although he acknowledged that Relation bears similarities with other private-backed-backed consolidators in the distribution space, the executive said that because the firm is at a different age and stage to many of its peers its story is resonating in the marketplace.

It is able to offer potential acquisitions the opportunity to be the platform to open up into new territories as part of Relation, which has tripled the number of states it is in over the last two years, but still only has a presence in 18 states and has plenty of scope for geographical expansion.

“We’re the beneficiary of our equity story because our growth is going to look like a hockey stick,” he said.

“So folks understand why we’re paying what we’re paying and know we think there’s going to be a real return on the equity component in a shorter time frame compared to selling to someone further along in their development,” the executive added.

The Nationwide distribution roll-up has been building a head of steam in 2021, and among its several acquisitions Relation has bought the first and third largest of the mutual’s former exclusive agents with deals for Laufer Insurance Services and the Michael Glick Agency/Glick Insurance Group.

Looking to join Relation? To learn more, contact Tim Hall, Executive Vice President and Head of Mergers & Acquisitions directly at (312) 714-7279 or by email.