Howden Insurance acquired VLC & Partners from the De Goudse

Stem op deze deal via de stempagina: https://mena.nl/genomineerden-best-deal-2024/

Name of the deal: Howden Insurance acquired VLC & Partners from the De Goudse
Date announced and/or closed: Announcement date: 19 December 2023 Closing date: 1 May 2024
Published value: € 250 – 500 million
Buyer(s): Howden
Target: VLC & Partners
Seller: De Goudse and management

Involved firms and advisors

Involved firms and advisors buy side:
Legal Advisory:  Norton Rose Fulbright
Financial Due Diligence: PwC
M&A Advisory: MarshBerry International
Tax Advisory: PwC
Software Due Diligence: PwC

Involved firms and advisors target:
Legal advisory: JB Law
Tax: Atlas
Financial regulatory: Finnius
Financial Due Diligence: Deloitte
M&A Advisor: Aperghis & Co

Involved firms and advisors sell side:
Legal Advisory: Hogan Lovells – led by Danielle du Bois-Buné with support from Bastiaan van Rath, Dane Solomon, Marieke Plaisier and Anastasiia Kachalova

Pitch

Brief description deal / Deal outline
De Goudse, a Dutch all-round insurance company, together with management, sold VLC & Partners, a Dutch top-10 insurance broker, to Howden, a global insurance group. The transaction was effectuated by means of a very competitive controlled auction process over a period of six months. The completion of the transaction was a.o. subject to approval from the Dutch Financial Supervision Authority (AFM) as well as works council advice. The transaction result for the Goudse was 300 million euro’s improving their Solvency.

About Howden Group
Howden Group is a global insurance and reinsurance broker headquartered in London. Established in 1994, it operates across multiple sectors and provides a wide range of services, including risk management and employee benefits. The company focuses on innovation and client service, emphasizing a people-centric approach to insurance.

About VLC & Partners
VLC & Partners is a Dutch insurance broker founded in 2009 and headquartered in Amsterdam. The firm specializes in insurance brokerage, risk management, and employee benefits, focusing on personalized service for its diverse clientele, which includes small to medium-sized enterprises and larger corporations. VLC & Partners emphasizes innovative solutions and technology integration, aiming to provide tailored insurance products that meet the unique needs of its clients.

About De Goudse
De Goudse is a Dutch insurance company founded in 1924, headquartered in Gouda. It offers a wide range of insurance products, including health, life, property, and liability insurance, with a strong emphasis on personalized service and risk management. Known for its reliability and innovation, De Goudse caters to both individual and business clients, promoting sustainability and ethical practices in the insurance sector.

Why should this deal win the Award for Best Deal 2024?
In our view this deal deserves a nomination for the following reasons:

Dynamic sector
The Dutch insurance market is one of Europe’s major insurance markets. The market for insurance brokers is furthermore in particular dynamic and currently undergoing consolidation due to increasingly stringent regulatory burdens (such as governance and risk management requirements), data standards, and the exit of a generation of directors / owners combined with the aim to build larger platforms creating economies of scale. There is a growing demand for personalised insurance products, driving innovation and diversification of insurance products. The attractive fundamentals of the insurance brokerage market combined with the opportunity for further consolidation and the availability of dry powder are driving a lot of interest of private equity interest into the sector. All the aforementioned elements, played a role throughout the transaction process and created the perfect backdrop for a sales process by De Goudse.

VLC & Partners’ leading position
VLC is not only one of the oldest brokers in the Netherlands, but also a leading corporate insurance broker in the Netherlands offering a full-service proposition to (mid-)corporates, SMEs, and HNWIs via a unique platform approach in essential sectors and niches in the Dutch market. VLC’s market leading position, combined with the market trends described above, resulted in a very competitive process with a lot of interest from strategic as well as private equity parties.

Complexity due to buy-and-build platform and regulatory aspects
VLC & Partners emerged from a series of strategic combinations, starting in 2017 with acquisition of Mandema & Partners. Since then, VLC & Partners pursued a diligent “buy, build & integrate” strategy and successfully completed more than >20 acquisitions. As a result of previous acquisitions, there were several minority shareholdings within the VLC group. As discussed in more detail below under the question regarding deal complexity, the alignment of the minority shareholders’ interests within the wider transaction required careful coordination as part of the overall transaction. Furthermore, the regulatory complexity of the insurance brokerage sector, required a heightened focus on financial regulatory matters in this transaction.

Strategic partnership
De Goudse aimed to attract a new long-term strategic partner to support VLC in its strategic ambitions and to accelerate VLC’s future growth trajectory. Howden is a global insurance group with a mission to build the standout European insurance broker. Howden has been active in the Netherlands since 2013 and this acquisition enabled Howden to significantly scale its existing operations in the strategically important Dutch market – one of Europe’s major insurance markets. VLC and Howden were able to form a strong connection build on their aligned cultures and client focus as well as their shared growth ambitions. This is particularly evident from the fact that Lando te Molder, former CEO of VLC, became the new CEO of the Howden Group in the Netherlands.

Effective management
Finally, the commitment and involvement of VLC management throughout the process is worth mentioning. Having previous experience in managing M&A transactions effectively, VLC & Partners’ board was actively engaged and responsive throughout the entire process.

Deal rationale
The main rationale for De Goudse to alleviate its capital requirements under Solvency II. By selling its participation in VLC, De Goudse was able to free up capital to ensure compliance with its capital requirements under Solvency II. For Howden, the acquisition of VLC enabled Howden to scale its existing operations in the strategically important Dutch market and marked a key milestone in achieving strategy to building the standout European insurance broker.

What is the impact of this deal for the company?
Through this transaction, VLC & Partners found a new strategic long-term partner that aligns with its core values, ambitions as well its principles of prioritizing its employees and customers. This transaction furthermore provides growth opportunities for employees of VLC as they became part of a global organization.

What is the impact of this deal for the direct stakeholders?
It was a strategic decision for De Goudse to divest its majority stake in VLC due to regulatory requirements.  A minority stake in VLC & Partners was held by the management. As part of the transaction, VLC’s management rolled over part of their equity into the Howden group. VLC will integrate 500 employees and seven branches into Howden’s existing operations in the Netherlands.

What is the impact of this deal on society?
The combination of Howden’s global reach with VLC’s local specialized knowledge in risk management, employee benefits and private insurance will provide possibilities to further focus on product and proposition development, digitalisation, and advancements in data and technology, which will benefit customers in various sectors in the Netherlands and abroad.

What was most complex about this deal?
One of the most complex features were the minority shareholders within the VLC & Partners group. As a result of earlier acquisitions and joint ventures, several subsidiaries within the VLC group had minority shareholders. Customary shareholders agreements were in place with such minority holders, which contained certain exit arrangements, but these arrangements did not sufficiently provide for the situation at hand and the interpretation of these arrangements therefore become the subject of debate between the relevant parties involved. As you will appreciate, the exercise of any buy-out rights would have negatively impacted the transaction perimeter, and thus the transaction value. Therefore, it was of paramount importance to timely and diligently liaise with the relevant minority shareholders in order to reach agreement on updated arrangements to ensure the continued partnership with the relevant minority shareholders with an appropriate horizon.

In addition to the challenges posed by the minority shareholders, this transaction took place within the insurance brokerage sector which is subject to regulatory requirements and supervision from the AFM. The VLC & Partners grouped consists of regulated entities which must comply with rules and regulations, including the duty of care towards its clients. The infringement of the duty of care is often used in the insurance brokerage industry to claim damages. The implementation and compliance with various regulatory policies, as well as challenges connected with interpretation of duty of care, were important discussion topics during the due diligence phase with potential bidders and negotiation discussions.