A recent report shows that some of the trends currently defining
the insurance industry include the acquisition of weak firms by stronger
enterprises, as well as the consolidation of existing assets in order to expand
operations and strengthen market position. In general, the focus of
acquisitions lies on acquiring firms that are good cultural matches and whose
products integrate well with existing offerings and are tailored to specific
geographies in order to improve return on equity.
Insurance Journal states that in the U.S., the insurance
sector is primed for M&A opportunities because the sector is currently
highly fragmented. To illustrate, companies with less than $10 million revenue
per year control more than 40 percent of the insurance industry’s total
revenues, creating a fertile setting for larger companies looking to
consolidate and expand by means of acquisitions.
Meanwhile, according to The Lane Report, for smaller, independent insurance
agencies that are prompted to sell or merge with larger enterprises, reasons
can vary from market pressures and an inability to navigate an increasing
amount of regulations to the high expenditure of running a business and
business owners simply reaching retirement age and looking to offload their
How M&As affect talent
Though products and geographic market presence can be main
motivators for M&As, it should be clear that acquiring human capital is an
equally important aspect. That’s why one of the most important questions during
an M&A is whether and how to integrate an acquired company’s workforce.
Unfortunately, in some cases, layoffs can’t be avoided. Yet with the current
high demand for talent in the insurance industry, as well as the skills gap, it
stands to reason that it’s usually more effective to hold on to existing talent
than to look for replacements. Experienced workers with a good understanding of
the industry should be considered assets that contribute significantly to the
overall value of an enterprise. For example, especially when an M&A serves
to solidify an enterprise’s position in a specific region, retaining the
existing workforce can mean preserving longstanding relationships with
consumers. It can also offer an opportunity to capitalize on the acquired
company’s established reputation in the community.
Of course, the upheaval surrounding an M&A calls for careful
adaptation of talent strategies in order to retain existing employees. While
for employers, M&As are business arrangements based in facts and figures,
for employees, they’re often confusing, emotional, and uncertain times that can
result in loss of engagement and productivity. That’s why it’s important to
adopt strategies that provide clarity surrounding the M&A process, as well
as take measures to engage employees and boost productivity.
In all of this, HR plays a vital role. From the very
beginning of the M&A process, HR departments are best advised to
collaborate in order to create talent strategies that provide employees with
clarity and—when possible—security. These strategies also need to address
cultural integration of acquired employees in order to motivate, engage, and retain
them for the long term.
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