By James Thaler

May 23 - (The Insurer) - World Insurance Associates president Tom Fitzgerald said the retail broker is looking to acquire $70 million of Ebitda and hire 200 producers in 2025, arguing its regional footprint, product mix and integrated model are advantages ahead of a potential initial public offering.

Fitzgerald made those comments in an interview at this month’s RIMS Riskworld event in Chicago, detailing WIA’s “two-dimensional” strategy balanced between a highly acquisitive inorganic push and an organic element aimed at bringing new capabilities to firms it acquires.

“The way I like to think about it is that we buy a lot of what I call small-to-middle-sized agencies in second- and third-tier cities, and so they're really good at what they do,” Fitzgerald explained.

He said WIA is “fortunate” to have financial sponsors in Charlesbank and Goldman Sachs, who he said “have really committed a tremendous amount of effort to grow” the platform.

“But when you join the World Organization, if you are a $5 million agency, now you got the (full weight) of a $500 million agency. That aperture (gets much wider), which is really, really cool, and that's how we're driving organic (growth).”

WIA currently operates in 30 states and has a stated objective of expanding to all of the Lower 48 as well as into Canada and London, with Fitzgerald saying WIA takes an “opportunistic approach” to acquisitions while “looking for the best deals” for firms that are growing.

“And so, if we don't find one of those in Montana, we'll keep looking. But at the end of the day, that's our objective relative to geography,” he commented.

“When we think about when we acquire a firm, we might get a new geography, but we also generally get some skill or capability that is highly accretive to our organization,” he noted, pointing to an acquisition WIA did in Louisiana that brought regional and product expansion.

Fitzgerald said WIA is differentiated by its “massive footprint,” with 350 offices throughout the U.S., versus around 40 for some of its much larger broking competitors.

“The competitive advantages that we bring to the table are that we're where other people are not. So, as we build capabilities and skills inside the World organization, we can deliver it to places that haven't seen it before,” he said.

“It gives us an unfair competitive advantage relative to providing expertise that these clients demand, either around a product or around a particular industry,” Fitzgerald explained.

WIA has also accelerated its producer recruiting strategy, having brought on board 15 producers in 2022, 50 in 2023, 75 in 2024, with an ambition to hire 200 in 2025.

“We're very sensitive to the concept of having contracts and non-solicitations and non-competes. We respect that because we simply don't want to be in court. There's no reason to fight over that,” Fitzgerald explained.

With the market for insurance talent tight, Fitzgerald said that WIA is benefitting from dislocation in the talent market caused by major M&A activity at larger firms, arguing that his firm can offer staff “a different experience”.

“I spend most of my day trying to take the bureaucracy out of serving clients, and we tend to find that's a very attractive environment for people who are good at serving clients,” he commented.

“They want to do that. They don't want to really do anything else. And so, eliminating the bureaucracy is top of the agenda for us,” Fitzgerald explained.

NO LET UP IN VALUATIONS

Despite higher capital costs and some major roll-up firms pausing aggressive M&A in order to focus on integration, Fitzgerald said he has seen no let up in the valuations acquirers are paying to do deals.

“When people saw interest rates tick up, there was this supposition that prices would have to come down. The bottom line is that it's still a very competitive environment for inorganic. The best properties continue to demand the best pricing,” he explained.

“So, while the competition may look a little different, it's still very competitive,” adding that the dynamics for publicly-traded and privately held acquirers are different.

“The arbitrage looks different from a forward-looking PE to what a PE on a private equity investment looks like,” he explained, adding that integration has been a priority for WIA since inception.

“It's a non-negotiable. We often get asked, by our bankers, ‘Have you ever lost a deal because you integrate?’”

“And the answer is, we've never been told we lost a deal because we integrated. It's generally that we weren't aggressive enough on pricing, but at the end of the day, we have a very, very succinct process.”

‘FULL CLARITY’ AROUND FINANCIALS AHEAD OF POTENTIAL IPO

Fitzgerald said that any company joining WIA gets integrated within a 90-day span, and that the firm has “a very specific approach to integration” where a 30-person team will “descend” upon acquired firms to complete integrations within a three-month time horizon.

“And so, by the end of 90 days, which is a tough process for some people, because we changed a lot of their technologies and processes in the way they were.

“But you come out the other end, and you've been acclimated to World, and we find that to be a real strategic competitive advantage,” he commented.

That integration strategy, Fitzgerald said, gives WIA “full clarity” around its financial performance and position, adding that the intermediary would feel comfortable signing off on financial documents the same as any publicly-traded firm, “because we know what's inside the portfolio.”

“We think it's a big competitive advantage and will create the ability for us to look at some version of strategic transaction, M&A, or potentially going public,” he commented.

WIA struck a deal for outside investment from Goldman Sachs’ asset management arm in August 2023 that valued the intermediary at a $3.4 billion enterprise value, and according to Fitzgerald, a firm such as his is unlikely to be able to remain private in perpetuity.

“No, I don't think you can. I think over time, as your valuation ticks up to $10, $15, or $20 billion, the value exchange for a private equity firm isn't as great as it was when you were half of that, (like) $5 billion or $3 billion, where they could make a meaningful investment and end up with a meaningful share of your organization.”

“Do I think we'll do another perhaps private equity transaction as our next trade? Yes, but at the same time, one of our sponsors at Goldman has a history and a lineage of taking some of their portfolio companies public,” he explained.

“And so, I think the easiest way for me to sum it up is that World employees are the greatest shareholders of the World Organization, and I believe that the leadership 100% would align around what's going to be best for them,” he added.

With large scale retail M&A deal activity accelerating in the last year following transactions between Aon and NFP, Marsh and McGriff, Gallagher and AssuredPartners as well as Woodruff Sawyer, Fitzgerald said it is unlikely WIA would soon be similarly be part of such kind of deal.

‘I think we're very committed to our strategy, which is to continue to acquire from an inorganic perspective, as well as to drive the internal organic strategy,” he outlined.

“I wouldn't say that anything is off the table as we consider the next chapter of the organization. If something presented itself that was truly attractive, and we felt like it would be the best place and best outcome for our employees. I'd say that we would consider it,” he explained.