USI Insurance Services L.L.C.’s acquisition of Wells Fargo Insurance Services USA Inc., announced in June, combines two top 10 brokerages and rewrites the rankings of the world’s top brokers. USI also recapitalized in March with Kohlberg Kravis Roberts & Co. L.P. and Montreal-based Caisse de dépôt et placement du Québec for $4.3 billion in what Chairman and CEO Mike Sicard called “a really different and innovative evergreen capital structure” where KKR chose not to put USI in a fund, but instead used its balance sheet to make the investment. He sat down recently with Business Insurance Reporter Matthew Lerner to discuss the Wells Fargo deal, USI’s plans and industry consolidation trends. Edited excerpts follow.

Q: How is the Wells Fargo transaction transformational for USI?

A: Separately, USI and Wells Fargo Insurance Services were each one of the 10 largest insurance brokerage and consulting firms. Now together, USI becomes one of the few largest and leading insurance brokerage and consulting firms globally, nationally and locally. Size doesn’t necessarily mean transformative, however, unless you can truly tap into the tremendous talent and world-class expertise of the professionals across the combined firm. That’s where I think the cultures of our two firms are so compatible and important. We’re coming together as a truly integrated one. We call it our USI One Advantage.

Q: What will be the greatest challenge or challenges in terms of integration?

A: We need to ensure a seamless transition for our clients with no changes to their policies and programs and continuity in their team. The good news is this is not our first experience. USI has done this over 200 times, and in 2014, we had the honor of doing a transaction with Wells Fargo for a portion of its insurance brokerage and consulting team members in 40 cities across the United States, so we have a prior successful path here to follow.

Q: Is there a timeline or any milestones in terms of the integration plan?

A: The first year is the most immersive period, where our team members get to know each other. We have had limited opportunity preclosing in this situation because of regulatory filings, regulatory approvals and the need to continue to operate as two separate independent firms. So, a lot will happen over the first year. With a transaction of this size, meaningful to USI, to Wells Fargo and to the industry, we had limitations on how much we can really do preclose.

Q: In terms of moving forward, what will be the key strategies for the combined company?

A: USI and Wells Fargo Insurance Services both started as small local agencies years ago, so we have a deep appreciation and understanding of the importance of local client commitment. Our key strategy moving forward will be focused on getting our collective teams out meeting with current and potential clients to introduce our expanded capabilities for those that know us and for those who we will now meet for the first time, including large risk management clients, middle market companies, smaller firms and individuals across property and casualty, employee benefits, personal risk, retirement solutions and programs.

Q: In terms of the brokerage space, are we going to see continued consolidation?

A: I do see the industry space continuing to consolidate, but it’s also changing, and that change will accelerate in the next five-plus years as people retire from the industry.

Q: Is this deal a singular opportunity? Are there other Wells Fargos out there? Will we see mega-deals that change the top 10 rankings?

A: I’d say yes and no. Yes, in that this is a uniquely large and exceptionally experienced and talented team of professionals across the country that has been connected together as a single firm, and that is rare in our industry. At the same time, no, in that there are over 30,000 insurance brokerage firms in our space in the United States and a nearly unlimited opportunity to partner with great firms and talent going forward. And USI will be very active in forging more of those partnerships going forward, and there are large firms, middle-sized firms and small firms that all can be exceptional partners going forward.

Q: That pace of consolidation, given the number of brokerages, will it remain the same? Are there any forces in place that would push it to accelerate or decelerate?

A: It’s driven by different forces at different time periods. There was a wave of consolidation driven for a period of time by public insurance brokers. There was a wave of consolidation for a period of time driven by banks getting into the insurance brokerage industry. Currently, the wave is being driven more by private equity money entering the insurance brokerage industry. So those waves have come from different investor partner parties, but the overall thrust and trend in consolidation has been pretty consistent over a long period of time.

Q: Do each of those consolidators have similar or different agendas?

A: I think different agendas. If you look at a strategic large public company, they will tend to be looking to add scope or scale to a part of a geography. But they’re already in the business, and so they know what they’re doing with the business, and they’re really looking, tending to fill in gaps and holes.

The bank-owned thrust that really is on the back end now, where banks tend to be more sellers than buyers of insurance brokerage agencies, was more of a total financial products thesis, in which all financial products could be part and parcel of a whole, with insurance brokerage and consulting certainly one important component of that. I think with the private equity firms, it’s different. There is more of a stand-alone recognition of the potential performance of insurance brokerage firms, both in their downside risk protection, but also their upside opportunity, and I think it’s been seen as a potentially solid investment vehicle for private equity firms even if that private equity firm itself doesn’t have a prior background or history in insurance brokerage. I think the investment community has found some success in the space, and that has engendered, I think, more interest from other private equity investors.