Get to Know the Insurance Division Associated with Eli Global
Last week, we sat down with George Luecke, Vice Chairman and Co-CEO of Global Bankers Insurance Group to hear what he has to say about how Eli Global shapes who they are. This week, George gave us a detailed look into how their acquisition process works. Read our interview to hear how they get deals done.
Tell us about Global Banker’s acquisition process.
In transaction, we often use letters of intent. There are different types of letters of intent depending on what processes are involved. Sometimes there is a negotiated transaction with just one counterparty, which is the best way for us to proceed because that allows us to talk directly with seller of a company or the shareholders of a company. In that context, you have informal discussions initially and then try to crystallize that into a letter of intent before moving to the next stage, which is more detailed due diligence and expanding that letter of intent into a definitive transaction documents, such as a stock purchase agreement.
Tell us more about the letters of intent.
The letters of intent can differ depending on the deal. Every deal is very, very different but generally they’re all going to be similar in that they tell the Eli Global and the Global Bankers story. We are different in the true long-term approach that we are able to take. Evidence of our true long-term approach is demonstrated in that Eli Global has never sold a company that it’s purchased and is part of the family.
Once an investment or acquisition is made that company is part of the family for the long-term. We retell that story in our bid letters or our letters of intent and then we set forth the key transaction terms as well so there’s the understanding of key terms. Those key terms are mainly price, structure, our intentions with respect to the management team going forward, some of our posts transaction strategies, and we specify our due diligence needs.
What is the ideal acquisition?
We often seek exclusivity. The ideal circumstance is when you’re in a one-off negotiation with a party and you also get exclusivity. That gives you the certainty that over that exclusivity period, you’re going to have a higher probability of successfully achieving the transaction, but that said, there are different processes. It ranges from a one-off negotiation to a full auction process where there’s a financial advisor involved on the sales side and they’re talking to ten or twenty potential acquirers. In that context, we often do seek exclusivity.
Sometimes exclusivity is not possible at the preliminary bid letter, maybe you get it at the second stage, which is the final bid letter. Although there is a lot of variation of bid letters, they are all similar their general content, it’s just a function if they are exclusive or not. Exclusivity is, of course best, we think, for both parties, because it increases the probability of success.
How do you approach due diligence?
We take a unique approach to due diligence and also just to processes, generally, that’s very different from most buyers in the marketplace and that’s actually why were able to be so successful at transactions. Over a very short period, probably three years, we’ve done eightteen transactions in the insurance space. That is a combination of acquisitions and reinsurance transactions. One of the reasons were able to do that is because we take a unique approach to the process, which is really designed to solve how do we reach agreements and what’s the quickest, most efficient way to get there. We also look at diligence as a way to understand the risks, but not as a way to reduce the price that we put on the table in the beginning.
In the market, generally the way it works is you have buyers who will bid very high and go to the next stage of the process, then eventually, maybe even get exclusivity. Once the typical buyer has exclusivity, they have increased their leverage and they now mostly use diligence to find reasons to reduce the price. That initial price was designed to gain them an advantage.
What we do is something different. When we put a price on the table, we strive to stand behind that price. So while diligence is there to uncover risks and make sure that we are managing through those risks by knowing what they are but also maybe contracting around them in the deal documents. We generally try to use diligence to support the offer that we put forward. We find that is a very different approach and we even say that in our bid letters. We say that we are going to take a different approach to due diligence then most sellers may have experienced in the past with other buyers or other processes that they may have been involved with.
How does Eli Global’s culture affect the acquisition process?
Eli Global is a very different culture. The traditional insurance industry is not as transparent as Eli Global, not as efficient as Eli Global culture, and not as entrepreneurial. This is true for most insurance carriers,and historically that has been the case. So one of the things that we bring to the mix is this bringing this unique culture to the insurance industry. When you now acquire a company and management and the staff, they get very excited through the process about becoming a part of a culture like Eli Global which is much more efficient, much less bureaucratic, much more results-oriented, and even much more leadership development and people-oriented.
When we close a deal, we like to bring that same energy to the insurance side and that creates so much enthusiasm. When then work together to improve that company’s operations and improve their ability to grow profitability into the future. The aspects of this include putting in new systems and new technology to enhance efficiency. This helps a lot of insurance companies to quickly get to the level where they can be as competitive as possible in their market.
Tell us what makes what makes companies want to work with Global Bankers Insurance Group?
I think it comes down to the transparency and ease of doing business. When you have a philosophy and strategy based on efficiency and transparency, that is going end up impacting the ultimate customer, which is the policy holder. What that means is that we need to be faster initially with policies, we’re going to be better at customer service, and we’re going to be better at servicing the policyholder over the life of that policy. One of the ways we do that is by putting in today’s best technology, which most of these insurance companies do not have.
We basically digitalize their business and enable more visibility for our customers who are our brokers, our agents, our policyholders, and other distribution partners. The technology we put in place also enables efficient issuance of policies and interaction with those policies over the multiple decades that they’re in existence.