Last week, 24 independent employee benefit, P&C, risk management and wealth management firms across 15 states — with $158 million in annual revenues and 20,000-plus clients — joined together to form Alera Group.

Despite now being the 14th largest private insurance firm and 7th largest private employee benefit firm in the U.S. — with more than 750 employees in 40 offices — Alera Group does not plan to stop there.

EBA spoke with Rob Leiblein, Alera’s chief development officer, on how the firm came together and where it plans to grow next. What follows is an edited version of the discussion.

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EBA: Why tie all these companies together?

Lieblein: The industry as a whole —P&C or employee benefits or wealth management — has evolved over the years from what started off as lifestyle businesses with recurring revenue. Every year, the firm’s revenue comes back and it wasn’t dependent on aggressive growth or sales strategies. The firm's generated high profit margins — often 30% or more.

Slowly but surely, the industry began to change. All of a sudden, healthcare costs became extremely big to a client’s profit and loss statement and all of a sudden people realized that they moved out of a lifestyle business and were in the consulting business.

The reality is, it was easy to be a $3-5 million firm 10-15 years ago. But, times have changed, particularly in the employee benefits space. This business totally shifted from a broker business, which is really not a good term to use, to a consulting business. Similar to a Boston Consulting or KPMG or Accenture. What you needed to succeed has greatly changed.

Technology is the biggest impact. Where technology played a minor role a number of years ago, now, technology is the single leading item in agencies. Long story short, size and scale started to matter. If you look around the landscape, firms were acquiring and getting bigger with many being backed by private equity. The Alera Group founding members started looking around and said, ‘For us to continue to do it by ourselves, it becomes very difficult and very expensive.’

These firms all have higher than average industry growth rates. At the end of the day, they recognize the power of size and scale. They recognized they have some common culture, some common collaboration. Also, if you are going to perpetuate internally, which very few firms can execute on. Then, when that time comes, if you don’t have that ability, every firm that says they are not going to sell, sells. They looked to the future and said, ‘Ultimately, we probably will all sell, so let’s build something together that allows us to retain significant equity for a long-time.’

EBA: When did discussions start on forming Alera Group?

Lieblein: I was an adviser to the Benefit Advisors Network. What was happening at BAN was members would join and every year several firms would sell. The board of BAN said, ‘What is the next evolution of BAN that we can provide an alternative to our members, so that when they feel they need to get bigger or they have a perpetuation issue , what can we do besides them going and selling?’ BAN came to me in the fall of 2014 and asked me to present several strategies to accomplish this at a big meeting February 2015.

One of those strategies was to pull the firms together, retain a significant ownership stake in it, go to the private equity world and take on private equity as a partner and use that to significantly grow the firms over a 10-15 year time period.

After looking at the various alternatives, it was at that point in time who was interesting in participating? By the end of June 2015, the firms collectively said, ‘Yes, we want to pursue this strategy. Let’s shake hands and put a contract together.’


EBA: What are the future plans for Alera? How will you seek new acquisition or M&A targets?

Lieblein: Currently, our firms overall have organic growth rates of about 10%. Built into the Alera business model is that we will continue to grow at no less than 7% — but at a base target of 10%. That is going to require to continue to hire new salespeople, new consultants and what I call technical people — risk control, underwriting, medical directors, etc. To continue to build out what we have, that is the organic growth side. We have a very defined plan what goes behind that.

That is coupled with the partnership plan, or mergers and acquisitions, where we expect to acquire firms in certain geographies where we do not have a presence. That would be some larger firms and we will also continue to what I call ‘roll-in’ where we currently have locations.

Our rough goal is — and this important — rough numbers of where we our breakdown includes 75% employee benefits firms, 15% P&C firms, 7% wealth management/financial services firms, and the remaining is ‘other.’ Our goal is over the next five years to get to a 45% employee benefits, 45% P&C and risk management and 10% wealth management/financial services. We do have a long-term plan as to where we want to go.

One of our main goals in the first year is not only to find employee benefit firms in markets we don’t have, but also to acquire P&C both in markets where we don’t have them or we have employee benefits only.

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