Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Gallagher buys U.K. brokerage Heath Lambert

Acquisition boosts U.K. retail business

Reprints
Gallagher buys U.K. brokerage Heath Lambert

LONDON—Arthur J. Gallagher & Co. has expanded its U.K. operations with the acquisition of Heath Lambert Ltd., a deal that observers said is a sound strategic move for Gallagher.

The Heath Lambert acquisition, which is Gallagher's biggest deal to date, will enhance the brokerage's international position and help better serve large accounts, they say. Gallagher looks to have struck a good deal financially as well, they say.

Under the terms of the all-cash deal announced last week, Gallagher paid £97 million ($158 million) for London-based HLG Holdings Ltd., the holding company for retail brokerage Heath Lambert. In a statement, Gallagher said it expects the deal to generate about the same amount in annualized revenues.

Gallagher President and CEO J. Patrick Gallagher Jr. said the deal with Heath Lambert represents “a perfect combination of very little, if any, overlap with what we're doing in London. It really rounds out all of the approaches we've taken in the U.K.”

Gallagher already is active in the London wholesale market, with a “substantial operation” that has nearly $100 million in annual revenue, Mr. Gallagher said.

And Heath Lambert brings “some expertise that we don't have—it's an expansion of our retail platform that we're very excited about,” he said.

In the statement announcing the deal, Gallagher cited several ways the HLG deal would enhance its existing U.K. operations, including expanding capabilities in fine arts, specie, real estate, employee benefits, major construction and other lines. In addition, the brokerage expects the deal to significantly expand Gallagher's U.K. benefits consulting and advisory services as well as its access to a wide range of retail clients.

Heath Lambert CEO Adrian Colosso will continue to oversee retail operations in the United Kingdom, reporting to David Ross, CEO of Arthur J. Gallagher International, according to a Heath Lambert statement.

Gallagher, which has been expanding internationally in recent years, previously bought Heath Lambert's Canadian operation, Mr. Gallagher said.

But as Gallagher has been growing in recent years, Heath Lambert has been shrinking. For example, in June 2008, the company—once a top 10 brokerage—sold its general wholesale and reinsurance operations to London-based Cooper Gay & Co. Ltd. Talks that would have merged Heath Lambert with Jardine Lloyd Thompson Group P.L.C. broke down in 2006. In 2004, the U.S. wholesale operations of Heath Lambert were spun off in a management buyout, creating Colemont Insurance brokers.

The deal is a plus for Gallagher, according to analysts.

“I think it's a good move,” said Meyer Shields, an analyst at Stifel Nicolaus & Co. Inc. in Baltimore. “Insurance is becoming more and more global, and Gallagher has been looking at increasing its presence among large accounts. One plank of that strategy is being able to better serve multinational companies.”

He said the move will enhance Gallagher's presence in the United Kingdom. “I think it's a better platform to reach out to continental Europe, and I think that this is a significant step toward making Gallagher more global,” Mr. Shields said. “It certainly doesn't look like they overpaid,” he added.

“Obviously, London is one of the biggest insurance markets in the world, and it clearly ups their game in that market,” said Mark Dwelle, an insurance analyst at RBC Capital Markets, a unit of RBC Dominion Securities Inc. in Richmond, Va. “It has to help, particularly in the specialty risk lines, because it gives them better access to Lloyd's, and Lloyd's writes a tremendous amount of U.S. specialty business.”

“This is an excellent strategic acquisition for Gallagher on several fronts,” said John Ward, CEO of Cincinnatus Partners L.L.C. in Cincinnati.

He said Heath Lambert's niche orientation complements Gallagher's own business. In addition, it helps Gallagher achieve its “growth objectives at a time when organic growth in this segment is nonexistent.” He added that the “transaction has good fundamental economics for Gallagher without adding incremental leverage.”

“We view this transaction as a modest positive for AJG as we believe it provides the company with a solid U.K. franchise at a decent price,” Dean Evans, an analyst with New York-based Keefe, Bruyette & Woods Inc., said in a research note. “We remain somewhat cautious given its size as this is AJG's largest deal ever and we believe an international transaction always comes with additional risk.”