Brown & Brown & the UK Insurance Brokerage Market

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That's impressive. You mentioned something interesting about organic growth in the UK, saying a good broker would achieve 5%. I'm curious about what you think the hurdles are. You managed to achieve decent organic growth, so what are the keys, and why is it so challenging?

It's difficult to keep people focused on core activities like servicing clients and acquiring new ones. In the UK, unlike the US, where I've worked with people, sales isn't as highly regarded. It has taken time for people to realize that good salespeople are vital to a business.

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Is there any difference between bigger deals and smaller deals, particularly in the SME sector?

I'm not saying it won't happen, but it depends on how the acquirer approaches and communicates their expectations to the organization, and most importantly, the timelines. If you're a smart acquirer, you recognize this. It depends on how much of an earn-out you've got in the business through the acquisition process. In the UK, it wouldn't be unusual for it to be 6% upfront and 20% over the next two subsequent years. That wouldn't be atypical of a typical M&A in the SME space. You have to be cautious during that period because the principals who have sold what is potentially their lifelong work, their legacy, have also left 40% of cash on the table. Anything you do that they could hold against you and say, "We would have achieved this if you hadn't done that," is a fine line between control and potentially destroying some of the value. If they don't hit their earn-out, it means you've got a business that isn't achieving what you want it to achieve.

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