Episode 127: Growth Through Acquisitions with Matt Poleski at Gallagher
Matt Poleski, Regional CFO/Finance Director at Gallagher, has had a remarkable career journey, starting as an auditor specializing in publicly traded subscription software firms at KPMG. His experience in the software subscription renewal model provided valuable insights into the dot-com era and equipped him with a strong financial background.
In 2006, Matt made a pivotal move into the insurance brokerage industry. This change offered him stability and vast growth opportunities. Gallagher, a global insurance brokerage company, became his new home. There, he witnessed the company's transformation from a $1.6 billion enterprise to a powerhouse approaching $10 billion.
Being an essential player in the industry, Gallagher connects middle-market companies with insurance carriers, offering a wide range of coverages, including directors and officers liability (D&O), professional liability (PNC) and various other insurance types.
Gallagher's business model is a well-balanced blend of organic growth and mergers and acquisitions (M&A). They aim to grow both organically and through acquisitions, considering the insurance brokerage industry's consolidation trends.
To facilitate its expansion and streamline operations, Gallagher made strategic investments to establish a common technology platform several years ago, integrating all subsidiaries into the same accounting system. This proved to be a smart move when Covid struck in 2020, as the company swiftly transitioned to remote work without any disruptions. Its robust technological foundation could claim the thanks.
Choosing acquisition opportunities
When Gallagher considers potential acquisitions, they approach it with a mindset of making one plus one equal three. This means identifying the strengths of the acquired company and leveraging them to create synergies that lead to greater combined value. The company's dedicated M&A integration team plays a pivotal role in guiding new acquisitions through the process. This ensures a smooth transition and alignment with Gallagher's goals.
Matt explains that their company now has a dedicated M&A integration team, which specializes in handling different work streams. He leads the accounting stream and acts as the main point of contact with clients. Other teams handle tasks like closing bank accounts, preparing system conversions, HR, operations and sales.
The integration process typically spans up to three years. In the first year, the focus is on getting the acquired company onto their systems. By the second year, the goal is to maximize synergy and make the combined business greater than the sum of its parts. By year two, the integration is usually complete.
Building relationships
For Matt and his team, relationships are at the core of their M&A strategy. They understand that sellers may have different motivations, whether it's for retirement planning or to access Gallagher's capabilities and expertise.
Building strong relationships and finding common ground is essential for successful deals. Gallagher is not just an insurance company; they are advocates for their clients, representing them in times of need and providing unwavering support.
Matt reflects on his close relationships with former acquisition partners within the company, considering them some of his best friends. These individuals have taken on diverse roles, from heading M&A to leading client service organizations and serving as Chief Legal Officers for different regions.
He emphasizes the importance of the HR component in the company's talent strategy, recognizing that 50% of their expenses are related to personnel costs. The goal is to view employees as assets rather than mere expenses, enabling the company to pay them well while ensuring they provide a return on capital by being in the right roles and contributing to synergies.
Creating effective teams does result in one plus one equaling three, leading to overall growth and success. Aligning incentives, where success benefits both the employees and the company, creates a positive trajectory similar to a rising stock price. Ultimately, the company's success is rooted in building strong relationships and a people-centric approach to business.
The personal touch
Matt takes pride in the company’s ability to help people rebuild their lives when there are claims or incidents. They act as advocates for their clients, representing them and providing support in times of need. While they have relationships with insurance companies, they primarily focus on being a reliable advocate for their clients.
Although they operate as a large company, they compete more with middle-market insurance brokers rather than other major international firms like Aon and Marsh. They have broader capabilities compared to the mom-and-pop insurance brokers they often face in competition.
While price and bidding are factors in some cases, their customer satisfaction is high, leading to successful renewals for their services. Overall, their mission is to be there for their clients when they need support the most and to provide exceptional service beyond what smaller brokers can offer.
Looking into the future
The company's growth is not solely driven by M&A. Its adaptability to market trends and its ability to capitalize on organic opportunities also plays a role. The insurance industry, being recession-proof, ensures steady renewals, contributing to Gallagher's continued success.
Matt envisions continued growth for the company, with a substantial pipeline for mergers and acquisitions. When he came on board at Gallagher, they focused on integrating newly acquired companies into their systems and achieving synergies in the back office. However, the approach has shifted toward creating front-office synergies, emphasizing the development of strong sales teams with scalable products.
Matt believes that building robust teams that are less reliant on individual efforts and more institutionalized within the company can help achieve faster revenue growth. This strategic shift has a two-fold purpose: to enhance Gallagher's sales capabilities and to position the company for further success in the future.
Ultimately, Gallagher's success can be attributed to its people-centric approach. They emphasize talent retention, providing career growth opportunities for their employees and creating synergies between teams to achieve maximum efficiency. This strategy has enabled them to outperform their peers and deliver value to both shareholders and clients.
With their commitment to excellence, strong relationships and strategic vision, Gallagher remains poised for continued growth and prosperity in the ever-evolving insurance brokerage landscape.
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