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Wightman: Tech firms may enter M&A frame

Arthur Wightman

Major tech companies could muscle in on reinsurance and insurance, PwC chief Arthur Wightman has predicted.

Mr Wightman, at the annual Monte Carlo Rendez-vous gathering for the industry, was speaking in the wake of a PwC report on mega deals and mergers and acquisitions (M&A). He said that companies outside the industry, especially hi-tech firms, could adapt their technological capabilities to insurance and reinsurance.

Mr Wightman said: “We really do feel technology companies, as an example, will start to look at insurance as a possible opportunity for them to explore, given their technological capabilities.”

And he added: “There are probably a couple of avenues that companies not currently in the insurance sector will come into the space.

“The first is clearly through investment, and we’re seeing a great deal of interest in the sector from the Middle East, and indeed the Far East, and that’s from non-aligned sectors.”

Mr Wightman said the mergers and acquisitions phenomenon would continue, with the industry splitting into large organisations offering a large range of products on one side, and niche operators on the other, resulting in a cutting out the middle ground firms.

He added: “I would say that the pricing multiples for some of the companies that may be under review as potential M&A targets are not currently as attractive as one might want.

“So I think it’s really important for people who are looking at investment or M&A activity to really be working out why it is they want to do the deal in the first place.

“If they are prepared to pay the multiple there have got to be some really good reasons to do so.”

He warned that not all mergers and buyouts were successful, and that careful planning was needed to ensure a deal was successful.

“I think that points to some of the issues we highlight in our report on mega deals and some of the issues I referred to,” he said.

“It’s so important to actively consider the whole deal life cycle when considering an M&A transaction before embarking on an M&A transaction.

“Companies that really take that seriously and invest appropriately in order to realise some of these benefits, ultimately will.”