Add Another Car to the M&A Train – for Technology Provider Deals

As my colleague Rob McIsaac pointed out in his blog post, “The M&A Train Keeps Rolling,” on January 14, the insurance industry has seen an increase in M&A activity. While his post focused on insurance carrier M&A, there’s significant activity also happening in the technology vendor space.

The largest deal is Atos’s announcement confirming that it has approached DXC about a friendly merger. The talks are in early stages, but the combined company would roughly double the size of Atos, making it the second largest digital technology services company, surpassing TCS and nearly reaching the size of Accenture. DXC was formed by the merger of CSC and HP Enterprise in 2017, and Atos, which merged with Syntel in 2018, has been actively pursuing acquisitions. Acquiring DXC would give Atos more of a presence in the North American market, providing potential resources to accelerate DXC’s digital initiatives and product development.

InsureTech M&A, which slowed slightly in the early days of the pandemic, picked up in Q4 and into the new year. American Family announced its plans to acquire Bold Penguin, an InsureTech focused on insurance distribution for small business commercial insurance lines. Bold Penguin acquired RiskGenius in October 2020 to provide more scale in the commercial market.

While American Family has announced that Bold Penguin will operate separately with “neutrality and confidentiality,” other carriers may question how independent they’ll remain. However, as my colleague Jeff Goldberg points out, American Family looks to benefit from the investment by facilitating better interactions between carriers and agents/brokers and showing leadership in enabling a better customer experience for commercial insurance lines.

Another insurer deal for an InsureTech is Aon’s acquisition of CoverWallet, an InsureTech focused on commercial lines distribution, following a partnership in the Australian market. As with the American Family/Bold Penguin deal, Aon looks to innovate its customer experience via the acquisition and focus on its core insurance product operations.

Finally, home services startup Porch announced acquisition of four companies, including Homeowners of America, an MGA/carrier focused on the homeowners insurance market and licensed in 31 states. It also acquired V12, a marketing/data firm; Palm-Tech, a home inspection company; and iRoofing, a roofing contractor software company. Previous acquisitions include Elite Insurance Group, an insurance broker. The acquisitions, which followed a public offering that resulted in $200M in capital, are a strategic move to add insurance sales, products, and servicing to Porch’s portfolio of home services.

Porch’s strategy is part of a trend by companies to bring insurance products and sales into consumer transactions rather than require a separate transaction. By integrating insurance into its services, Porch can further personalize the insurance purchasing process to better meet customer needs and experience. Note that while not an acquisition, Tesla is partnering with Markel subsidiary State National for a similar approach to providing insurance products as part of other customer purchase transactions.

Whether the purpose is to scale, as with Atos; to expand distribution capabilities, as with American Family; or to strategically integrate insurance into other services and products, as with Porch, M&A activity should continue strong in 2021 as companies position themselves for the gradual transition to whatever happens after the pandemic ends. The M&A train will keep rolling, and it will become larger as it heads into a post-pandemic world.

For more on recent M&A activity in the insurance software space, see Novarica’s latest report, Insurance Software M&A Trends: 2021 and Beyond. If you’d like to discuss insurance vendor strategies, InsureTech, or other topics related to insurance solution providers, please contact me.

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