One of Canada’s largest independent insurance brokerages, Westland Insurance Group, is selling a majority stake in its business for $1.1-billion to a U.S.-based brokerage owned by Ontario Teachers’ Pension Plan, securing new backing to help fuel Westland’s rapid expansion in a consolidating market for insurance brokerages.
By taking control of Westland, BroadStreet Partners Inc., an Ohio-based brokerage that Teachers has owned since 2012, is making its first acquisition in Canada. Through the deal, Blackstone Credit is exiting an investment in Westland that totalled $1.4-billion in equity and debt, with a syndicate of Canadian banks buying out Blackstone’s debt.
The Wubs family, which founded Westland in 1980 as a single brokerage in Ladner, B.C., will stay on as a significant minority shareholder and will keep operational control of the company, according to a news release.
Westland has been expanding aggressively over the past three years, making 60 to 70 acquisitions to snap up smaller rivals. The decision to sell to BroadStreet, backed by Teachers, stemmed from a need to secure long-term capital that would allow Westland to continue to expand rapidly.
As interest rates have spiked higher, the company wanted to make sure the cost of its capital and debt stay competitive, and it has seen opportunities to continue acquiring brokerages that are coming under pressure in the current environment.
As part of the deal, BroadStreet and Teachers are committing to provide an unspecified amount of growth capital to help fund Westland’s further expansion.
“We did get to a stage where we wanted to … make sure that the capital we were getting and the debt we were getting would allow us to continue to grow at the pace that we wanted to,” said Jason Wubs, vice-chair in charge of mergers and acquisitions and a former chief executive officer of Westland, in an interview. “The spirit of the partnership is that we can continue on our current trajectory.”
Canada’s commercial insurance market is competitive, with nearly 100 insurers offering some form of commercial coverage, according to the Insurance Bureau of Canada. But the industry has seen a wave of consolidation, with some large global insurers dropping coverage in certain sectors or exiting the Canadian market altogether.
For business owners – particularly small proprietors who have endured several years of difficult economic conditions under COVID-19 restrictions – insurance brokerages are a lifeline in being able to renew policies at competitive rates.
Westland is based in Surrey, B.C., and has more than 200 locations across Canada, earning annual revenue of about $500-million, with more than $2.5-billion in insurance premiums traded. It now has about 2,600 employees and will be BroadStreet’s exclusive partner in Canada.
Over the past 20 years, Mr. Wubs says the company had been quietly acquiring dozens of insurance brokerages across the country, predominantly in Western Canada. As the company has grown across the country, the expansion has accelerated. The firms acquired range in size from large brokerages that specialize in commercial trucking to smaller, niche players that serve the arts and music communities.
Earlier this month, Westland announced three more acquisitions, adding northern Ontario-based Haggett & Rogers Group of Companies Inc., Calgary-based BMT Insurance Brokers Ltd. and Winnipeg-based Dimensions Insurance Management Inc. to its property and casualty insurance lineup.
While Mr. Wubs said the company remains focused on growing in the Canadian market, there are opportunities in certain sectors across the U.S. border. For example, last year, the company entered the U.S. market for the first time, buying Front Row Insurance Brokers Inc., a brokerage largely focused on the film and entertainment business, with offices in Los Angeles and New York.
The deal also gives BroadStreet a Canadian foothold to build a more far-reaching North American business.
“Westland is highly attractive to us because of its scale, history of organic growth and strong management team,” said Greg Nielsen, senior managing director of private capital at Teachers, in an e-mailed statement. “With this partnership, BroadStreet will have greater scale and a cross-border presence, making it one of the largest independent insurance and benefits brokers in North America.”
The deal is expected to close in the second quarter of this year, pending regulatory approval.