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M&A Likely To Be Limited To Big Companies Buying Small

Although making acquisitions is a prudent strategy for forward-thinking surplus lines insurance executives seeking to build their organizations, potential sellers are unlikely to agree to lower the deal prices offered, experts recently warned.

By Susanne Sclafane | Updated on February 28, 2010

Although making acquisitions is a prudent strategy for forward-thinking surplus lines insurance executives seeking to build their organizations, potential sellers are unlikely to agree to lower the deal prices offered, experts recently warned.

The interplay between thoughtful buyers looking to diversify existing platforms in a tough market and stubborn sellers could fuel hostile takeover attempts, predicted Stephen Way, managing director of Southwest Insurance Partners. Insurance executives “don’t want to sell their companies below book. That’s about what most of them are worth–certainly according to their current [share] prices,” he said.

“So, hostile acquisitions might prove to be a little more successful than friendly ones at the moment, because shareholders may be more interested in the M&A activity than managements are,” said Mr. Way, whose firm–a Houston-based insurance holding company–was set up in 2007 to make acquisitions and investments in the insurance industry.

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