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2020 brokerage revenue: $2.70B
Percent increase (decrease): 12.8%
Hub International Ltd. has not relented in its purchase of smaller rivals despite the restrictions and other obstacles to business imposed by the COVID-19 pandemic.
As it continues its years-long acquisition strategy, it has broadened the range of businesses it is buying, its top executive said.
“The reality is, in 2020 we did 65 acquisitions, which was really in line with what we did in previous years,” Hub CEO Marc Cohen said. That compared with 70 acquisitions in 2019, 66 in 2018, and 52 in 2017.
The deals helped Chicago-based Hub grow its brokerage revenue to $2.70 billion last year, a 12.8% increase over 2019, and it remains the world’s 5th largest brokerage.
Hub is still looking for strong growth companies with strong leadership in various geographic areas in North America, such as the Southeastern U.S. and Canada, to extend its reach to places where it does not have operations and to strengthen existing businesses, Mr. Cohen said.
In addition, “We are diversifying our focus on what we are looking for in our acquisition strategy,” including adding retirement planning and employee benefits in Canada, Mr. Cohen said.
Timothy J. Cunningham, managing director at Optis Partners LLC, a Chicago-based investment banking and financial consulting firm, noted that Hub is one of the most acquisitive brokers.
“There’s so much competition in the traditional retail distribution space that the ability to grow” in the current M&A environment “may not be as easy as it was before, so you expand your product thinking a little bit,” he said.
Mr. Cohen said Hub continues “to focus on creating what we’re calling a boundary-less organization” so that the “best resources and experts and specialists are available to our employees and our clients regardless of where they’re located across North America.”
As part of the strategy, Hub is investing resources to expand its services for various business sectors, Mr. Cohen said.
“We’ve seen over the last three or four years that when our people specialize, they typically produce more business than those that don’t,” he said.
In addition to continuing its acquisition strategy during the pandemic, Hub actively recruited staff, Mr. Cohen said.
Key hires in the past year include: Bryan Davis, Chicago-based executive vice president and head of personal lines strategy and business development, who is leading Hub’s transactional lines growth strategy, and was previously with United Services Automobile Association; Philadelphia-based Pete Reilly, a former Arthur J. Gallagher & Co. executive, who joined Hub to lead the North American health care specialty practice; and David Cloward, a former Allianz Global Corporate & Specialty SE executive, who joined Hub to lead its entertainment and sports specialty practice in Los Angeles.
During the pandemic, Hub has relied on the business culture it has built as it has grown, which kept employees aligned, and on its digital capabilities, Mr. Cohen said.
“At Hub, we began to invest in digital marketing capability years ago,” and the investment has proved itself during the pandemic, he said.
Michael Dion, vice president and senior analyst with Moody’s Investors Service in New York, said Hub “has really stood out since the pandemic’s onset. When everything was shutting down temporarily, they were still able to generate not only profitability” but “fairly decent growth.”
Hub is majority owned by San Francisco-based Hellman & Friedman LLC, which bought the brokerage in 2013. A Toronto-based private equity firm, Altas Partners LP, acquired a minority stake in the brokerage in 2018.
“We’re very happy with our current owner and we believe they’re very happy with us as well,” Mr. Cohen said.
Mr. Dion said, “Their ownership structure right now is probably a good one in the sense that … you’ve got the private equity ownership group along with some good employee ownership as well.” This provides “a good balance as long as they’re able to generate good cash flow, which they do internally, and then (they) have the capital markets to raise money if they’re looking to buy,” he said.
Hub’s role during the hardening market has been to “educate clients as to why the rates are increasing, to be diligent and to provide optional program structures and continue to be consultative,” Mr. Cohen said.
“There’s a lot of stress today, and I think we can help relieve some of that stress by being a thoughtful, empathetic, trusted adviser.”