A PwC report has set out why alignment with overall company strategy and preservation of value are key to pending and future mergers.
The report, Insurance 2020: On Track for the Payback, Realising Megadeal Potential, outlined the ways in which insurers can address the basics of deal-making in order to withstand the complexities and challenges of large acquisitions.
The report highlighted challenges facing the insurance industry in the midst of a flurry of megadeal merger and acquisition (M&A) activity, including the risk that deal strategy could become defined by size rather than suitability and fit.
Another challenge is the possibility that a technology or telecommunications giant could seek to acquire an underwriting platform and ready-made market share to align with its own analytics and distribution capabilities.
The industry could also face board challenges around competing in an increasingly consolidating marketplace.
The report suggested that there is a risk that non-participation in the current M&A wave could make companies vulnerable to takeover themselves.
PwC believes that with the industry transforming, finding ways to sustain growth and keep pace is vital.
By focusing on the basics with a clear vision of how and where their organisations intend to compete, boards can fully realise the role M&A can play in reinforcing their competitive platform, according to PwC.
Arthur Wightman, PwC Bermuda territory and insurance leader, commented: “Acknowledging these challenges and tackling them head-on drives the best chance of success, in particular where bold decisions are being taken in response to today’s M&A market.”
“Decisions need to be fully informed with those responsible being assigned and accepting accountability, from board level through to business unit leaders driving the operations, for the evaluation and delivery of deal objectives. These megadeals can propel businesses ahead of competitors and have the potential to reshape the industry.”
