Just Group Deal Exemplifies Benefits of Mergers

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Just Group, the specialist pensions company formed in 2016 by the merger between Just Retirement and Partnership Assurance, is reporting a 40% increase in profits during the first half of 2017. As an M&A consultant, the news provides me with ample evidence that the merger was good for both companies. Now I look forward to seeing what Just Group accomplishes for the second half of the year – and then on into 2018.

A big part of M&A consulting is helping clients quantify the potential benefits of merging. If those benefits don't justify the transaction, then any potential deal either has to be abandoned or reworked to make it more attractive. I have no knowledge of the details worked out between the two parties in the Just Group merger, but the combined company's success in the months since the transaction indicates the move was a smart one.

Positives from the Deal

Just Retirement and Partnership Assurance competed against one another to provide a range of retirement products as separate entities. They continue to offer those same products after the merger, but with better margins and a better risk selection the deal has afforded. Those better margins are largely responsible for the growth in profits that has seen Just Group earn £104 million so far in 2017.

Another important benefit of the merger is a declared £1.17 first-half dividend, up 6% from the company's previous dividend payout. The higher dividend is a reflection of the company's commitment to achieve cost savings in the region of £45 million annually, a commitment Just Group announced in 2016.

If all goes according to plan, Just Group could finish the year with significantly higher profits and margins over 2016. However, there is a chance that margins can be slightly lower during the second half of 2017, according to the company's most recent financials.

Size Was the Key for Just Group

Every merger has its strengths and weaknesses, the Just Group merger included. The most significant benefit to the Just Group deal has proven to be size. Combining the two pension specialists into a single entity allowed the new company to leverage combined assets to generate better returns while maintaining the required solvency ratio. In the era of pension reform under which the merger took place, this was no small undertaking.

Just Group exemplifies the benefits of mergers that are carried out the right way. Two companies that may have not done as well competing against one another as separate entities have combined to generate higher profits, a higher dividend, and more opportunities for future growth.

As an M&A consultant, I am an expert in buying and selling businesses. I can help you prepare your business for sale in order to maximise ROI at the time of sale. I can also advise on the potential benefits of your potential merger or acquisition. My goal is to make sure your best interests are guaranteed in any merger, acquisition, or straight sale.

Sources:

1.FT – https://www.ft.com/content/2d33d40f-0ba6-3b43-a3bc-63fb084956f1

2.FT – https://www.ft.com/content/52f7013e-b8f7-3903-97e7-c654c4ad15cf

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Author: Tim Luscombe

Hello, I'm Tim and I'm a specialist in corporate finance for the owner managed business. If you've been approached to sell your business, or you are thinking of buying a business or you just want to know what your business ...