Private equity buying spree boosts profits at Arachas owner
Ardonagh, the owner of Ireland’s largest insurance broker, has increased its earnings nearly fivefold in five years through an aggressive buying spree and expansion into new markets.
The private equity-backed company, which is led by Irish CEO David Ross, bought Arachas for €250m in 2020 and has added six other firms to its platform since then, including Glennon Insurances last July.
It reported a $476m profit in 2022, fueled by $1bn in new funding from owners Madison Dearborn and HPS Investment Partners, alongside the Abu Dhabi sovereign wealth fund, a new investor. The group earned $98m in 2017, its first year of operation, when it was just in the UK.
“From our first international acquisition in 2020, Ardonagh International has been a priority for investment and finished the year as an $88m adjusted EBITDA unit, growing both with platform and niche acquisitions and powering further expansion by local leaders in those businesses,” said Mr Ross.
He said the performance in 2022 had “topped out the vision we had five years ago” and that the company was now entering its next phase of growth, which would involve leveraging its buying power to grow its non-UK businesses with acquisitions.
Ardonagh completed 39 deals in 2022 along, with purchases in Portugal, the Netherlands and Australia. The company said it has 70 more transactions in the pipeline, representating $100m in new earnings when completed.
Ardonagh emerged out of the rebranding of troubled UK insurance broker Towergate and has gone on to become the largest independent in the UK market and top 20 globally with $13bn in premiums placed annually.
In July 2021 Ardonagh launched its Dublin-headquartered European division, headed by Arachas CEO Conor Brennan, to develop its business in the European market.
Arachas is just one of a clutch of consolidators – most of them backed by private equity money – that have been buying up brokerages in a fragmented Irish market. Aston Lark, Chill Insurance owner Three rock, Assured Partners and NFP have all been active.
Deals have come thick and fast in the last two years as independent operators have opted to sell up rather than contend with rising costs and a high regulatory burden.
Ireland is especially attractive to private equity buyers because of its attractive income profile and scope for cost-cutting as the number of players in the market shrinks.